US stocks: US market ends lower as hot inflation data, Fed comments heighten rate worries

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The Labor Department said the Consumer Price Index rose 0.4% in October, exceeding the 0.3% increase forecast by economists polled by Reuters. It marked the third consecutive monthly gain of at least 0.4%, following a 0.6% rise in September.

The data came after Fed Governor Christopher Waller said the central bank should raise short-term interest rates in December even if inflation had moderated. He added that policymakers should consider a larger, half-percentage-point increase if price pressures worsened.

Markets are now fully pricing in a rate increase of at least 25 basis points at the Fed’s December meeting, according to CME FedWatch, up from an 84% probability on Monday. The odds of a 50-basis-point increase rose to 11.8% after receiving no consideration in the previous session.

The two-year US Treasury yield, which is particularly sensitive to expectations for Fed policy, surged nearly 20 basis points and was on track for its biggest one-day increase since April 9, 2025, when US President Donald Trump announced sweeping global tariffs.

Treasury yields rose even as oil prices fell to two-month lows after US officials played down the prospect of imminent military action against Iran.

“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.

“From our perch, that is irrational. The thing that has pushed CPI up over the last six months and has the Fed a little bit more concerned and therefore has restarted hiking rates is because we’ve seen oil, energy and diesel push through in terms of inflation. If we have oil now going the other way ... this is all going to settle down.”

The S&P 500 fell 28.46 points, or 0.38%, to close at 7,521.48. The Nasdaq Composite declined 185.90 points, or 0.74%, to 25,067.23, while the Dow Jones Industrial Average lost 161.95 points, or 0.31%, to end at 52,227.80.

Technology stocks come under pressure

The S&P 500 and Nasdaq had advanced for two consecutive sessions, recovering from the previous week’s sharp losses triggered by concerns that tighter government regulation could slow the AI infrastructure buildout.

The S&P 500 technology sector fell more than 1% on Tuesday, making it the worst performer among the index’s 11 major sectors.

Nvidia dropped nearly 6%, extending its two-session decline to about 10%. The chipmaker’s shares have faced pressure amid uncertainty surrounding CEO Jensen Huang after the company launched an internal investigation into allegations involving a Chinese businesswoman.

The Information reported allegations that Huang’s relationship with the executive facilitated the shipment of at least $7.5 billion in Nvidia chips through Chinese companies.

Losses in the broader Philadelphia Semiconductor Index were more limited following two consecutive sessions of gains, highlighting continued volatility across the AI trade.

Several Fed officials adopted a hawkish tone on Tuesday.

Dallas Fed President Lorie Logan said the central bank needed to deliver at least two more quarter-point rate increases to bring inflation down and might need to act quickly.

Kansas City Fed President Jeff Schmid said he believed the current policy rate remained “fairly accommodative.”

Fed Vice Chair for Supervision Michelle Bowman stopped short of calling for further rate increases but acknowledged that inflation remained the central bank’s top priority.

Anthropic IPO draws investor attention

Investors are also preparing for Anthropic’s expected stock-market listing later this month.

The AI company said its initial public offering could raise as much as $64.4 billion and give it a fully diluted valuation of up to $1.4 trillion.

Anthropic’s listing could intensify competition among major AI companies for investor capital and prompt portfolio repositioning.

Neocloud company CoreWeave was scheduled to report quarterly results after Tuesday’s closing bell. Concerns about the sustainability of the AI boom and CoreWeave’s debt burden have weighed on its shares, which are down about 33% this year.

CoreWeave and peer Nebius both ended the session lower.