By Jessica Menton and Nathan Allen
U.S. stocks extended their losses Wednesday, a day after snapping a weeklong winning streak amid lingering trade tensions and questions over the direction of Federal Reserve policy.
The Dow Jones Industrial Average slid 43.68 points, or 0.2%, to 26004.83. The S&P 500 fell 5.88 points, or 0.2%, to 2879.84 and the technology-heavy Nasdaq Composite lost 29.85 points, or 0.4%, to 7792.72.
U.S. equity markets have eased over the past two sessions after rising sharply the prior week when Federal Reserve officials hinted that the central bank might lower interest rates to offset the negative effects of trade disputes.
"Stocks are likely pulling back due to profit-taking as investors look ahead to what the Fed is going to do next week," said Ed Cofrancesco, chief executive of International Assets Advisory LLC, an Orlando, Fla.-based brokerage firm. "Last week's jobs report wasn't as strong as we would have liked, but that justifies the Fed possibly cutting rates. The U.S. economy, however, continues to be strong."
Some analysts say markets may have overestimated the likelihood of such a rate cut, given recent positive economic data.
Ipek Ozkardeskaya, senior market analyst at London Capital Group, said heightened expectations of a rate cut may now force the Fed to act sooner than intended to avoid disappointing the market and driving up stocks' volatility over the summer.
Weak inflation is likely to fuel further speculation over the Fed cutting rates and may weigh on the dollar, some analysts have said. Inflation pressures remained muted last month.
U.S. consumer prices inched up in May, restrained by a decline in energy prices. The consumer-price index, which measures what Americans pay for household goods and services such as toys or electricity, rose a seasonally adjusted 0.1% in May from the previous month, the Labor Department said Wednesday. Excluding volatile food and energy prices, costs were also up 0.1% on the month.
In Wednesday's action, shares of energy companies weighed on the S&P 500, with the sector losing 1.4%. Shares of Dow components Exxon Mobil and Chevron lost 1.1% and 0.8%, respectively.
The losses came as global oil benchmark Brent crude dropped 3.7% to settle at $59.97 a barrel after data from the American Petroleum Institute showed that U.S. crude stockpiles climbed more than expected last week.
The Energy Information Administration, meanwhile, reported Wednesday that U.S. crude supplies climbed by 2.2 million barrels for the week ended June 7, a second weekly gain in a row.
The yield on 10-year U.S. Treasurys rose to 2.129% on Wednesday from 2.140% on Tuesday. Bond yields move in the opposite direction of prices.
The WSJ Dollar Index, which tracks the dollar against a basket of 16 currencies, was flat while gold rose 0.4% to settle at $1331.90 an ounce.
Elsewhere, the Stoxx Europe 600 fell 0.3%. In Asia, China's Shanghai Stock Exchange dropped 0.6% and Japan's Nikkei 225 fell 0.4%.
Joanne Chiu contributed to this article.
Write to Jessica Menton at Jessica.Menton@wsj.com