United States Treasury yields jumped and Wall Street stocks fell on Tuesday after a hotter than anticipated inflation reading boosted chances for a Federal Reserve rate hike of half a percentage point next month. The consumer price index rose 0.4 percent in October against a 0.3 percent forecast, and core CPI landed at 0.3 percent, above the 0.2 percent consensus.
Why it matters
The odds moved fast. Before the data landed, Fed Governor Christopher Waller said in London that a core reading of 0.3 percent for October would prompt him to consider a half point hike at the Fed December 8 to 9 meeting, and the market has now fully priced in a 25 basis point hike in December with a small chance for a 50 basis point hike. The 2 year note yield rose 18.44 basis points to 4.731 percent. Earnings reports due this week from tech companies will be another test, as investors fret about the cost of the AI buildout and its profitability.
The stocks fell across the board. The Dow Jones Industrial Average fell 0.30 percent, the S and P 500 declined 0.38 percent and the Nasdaq Composite fell 0.74 percent, with Nvidia the biggest drag as its shares fell 5.5 percent on Tuesday. Earnings reports due this week from tech companies will be another test as investors fret about the cost of the AI buildout.
What happens next
The relief came after hours. CoreWeave beat estimates, raised its forecast and said it would be profitable in the first half of 2028, and its shares jumped 8 percent. Asian stocks rallied on Wednesday, Nasdaq futures jumped 1.3 percent, and the AI trade steadied, but the rate question has not gone away.
What happens next will be decided by the Fed and by the next inflation data. A half point hike would be the most aggressive move in years, and it would push mortgage, auto and credit card rates higher still. For now, Wall Street has gone from debating whether the Fed hikes in December to debating how big the hike will be. The Dow fell 0.30 percent while the S and P 500 fell 0.38 percent, and Nvidia was the biggest drag as its shares fell 5.5 percent on the day.
