U.S. stocks fell on Tuesday after a hotter-than-expected inflation reading for October hardened expectations that the Federal Reserve will raise interest rates next month.
Stocks Fall Following October Consumer Price Index Report
At the closing bell, the S&P 500 had dropped 0.38% to 7,520.93, while the Dow Jones Industrial Average retreated 157.86 points, or 0.30%, finishing at 52,231.89. The Nasdaq Composite fell 0.74% and closed at 25,065.87, according to CNBC.
Nvidia was a major weight on all three leading indexes, tumbling over 5% as it missed out on the tech advance that followed CEO Jensen Huang’s disclosure over the weekend regarding a relationship with an alleged Chinese spy.
"But if the October CPI inflation data out later today are similar to the past two monthly readings—with core CPI inflation around 0.3 percent or even higher—then a stronger policy move may be needed. In that case, I believe a 50 basis point hike in the policy rate should be… pic.twitter.com/3kCMy2p0BK
The Labor Department reported that the Consumer Price Index rose 0.4% in October.
That figure was above the gain of 0.3% that economists polled by Dow Jones had expected, following a 0.6% increase in September.
Excluding the categories of food and energy, the core CPI rose by 0.3% during October, exceeding the 0.2% advance that economists had anticipated. Annual figures were not provided for the report because of the 2025 government shutdown, according to CNBC.
Across international equities, markets in Europe and Asia mostly trended upward, highlighted by South Korea’s Kospi surging 4.4 per cent to secure one of the top performances globally, fueled by strength in AI-beneficiary tech giants Samsung Electronics and SK Hynix.
After the firm September PCE inflation reading was released last month, Kevin Hassett allowed that October could return to the lower monthly readings seen in the summer, proving September was "a blip." But he added, "if October comes out really high, then I think the Fed would… pic.twitter.com/Gwzryh9R5Y
On the New York Stock Exchange, declining issues outnumbered advancers by 2.27 to 1, while a 2.26-to-1 ratio of losers to winners was recorded on the Nasdaq.
Christopher Waller Warns of Possible Half-Point Increase
During a London speech earlier on Tuesday, Federal Reserve Governor Christopher Waller indicated that a December interest rate increase is probable, while also raising the possibility of a larger half-point adjustment given persistent inflationary pressures.
October’s firm inflation reading raises the question of whether Federal Reserve officials will accelerate increases at their December meeting or beyond. A big question—beyond the heavy focus on December (could AI tightening prompt another skip? does 0.4% on core PCE put a 50 in…
CNBC reported his remarks: While the precise timing of the hikes doesn’t matter, ensuring that the promised hikes are implemented in a reasonable period of time does,
he said.
Waller stated that he would support a 25 basis point increase at the Fed’s Dec. 8–9 interest rate meeting, but added that a larger move should be considered if inflation remained elevated.
US Consumer Prices are now 14% above where they would be had inflation actually averaged 2% since January 2020. The Fed should be hiking rates at every meeting until that gap is erased. Instead, it continues to tolerate the destruction of purchasing power while pretending its… pic.twitter.com/ybMmSkv2Qs
In that case, I believe a 50 basis point hike in the policy rate should be considered at the December meeting,
Waller said, according to The Motley Fool, noting that a smaller hike could put the central bank’s credibility at risk.
Other policymakers also took a hawkish tone.
Lorie Logan, president of the Dallas Fed, called for continued monetary tightening, asserting that at least two additional quarter-point hikes are necessary to rein in inflation and suggesting those actions may need to be implemented swiftly.
Kansas City Fed President Jeff Schmid described the current policy rate as fairly accommodative,
as reported by BigGo Finance.
Kevin Hassett, director of the National Economic Council, called Tuesday’s BLS release a disappointing report during an appearance on the Fox Business Network, stating that he does not want to say it is a good number because it is not, and noting that the trickle-down effect from higher energy prices is definitely very palpable in the data.
Treasury Yields Rise as Traders Reassess Borrowing Costs
Treasury yields jumped as traders reacted to the inflation report, fearing that interest rate increases could now be more likely in 2027.
The 10-year Treasury note yield advanced back above 5% before later moving just below that level, sitting at 4.99% compared to 4.88% late Monday, according to Dailyrecordnews.
Traders now see a December rate hike as a near certainty, with a small chance of a supersized increase.
CME FedWatch figures highlighted by the Honolulu Star-Advertiser indicate that investors have fully factored in at least a 25 basis point adjustment for the December gathering—up from Monday’s 84% probability—while the odds of a 50 basis point move rose to 11.8% after previously receiving zero probability.
What kind of has the market spooked a little bit is this idea of, ‘Well, we were already pricing in a December hike … but maybe it’s not 25, maybe it’s 50, and maybe the Fed’s more worried about inflation than I am, so let’s sell some stocks,’
said Jason Ware, chief investment officer at Albion Financial Group in Salt Lake City, Utah, as reported by BigGo Finance.
Earlier coverage: U.S. Stocks Slide as Hotter October Inflation Data Drives Yields Up
