Stocks fall as inflation data matches Fed official's warning threshold
The S&P 500 dropped 0.4% Tuesday after core inflation hit 0.3%, prompting traders to expect aggressive interest rate hikes.
By Lorenzo Marshall ·
U.S. stock indexes declined on Tuesday after new data showed consumer prices rose more than expected last month.
The S&P 500 fell 29.01 points to 7,520.93, reversing part of its previous day's gain. The Dow Jones Industrial Average lost 157.86 points to close at 52,231.89, while the Nasdaq composite dropped 187.26 points to 25,065.87.
The market reaction followed a specific warning from Federal Reserve Governor Christopher Waller. Speaking in London before the data release, Waller said a stronger policy move might be needed if the core inflation measure rose by 0.3% from September. He argued that a standard quarter-point hike would put the Fed's credibility at risk. He stated the central bank should consider a half-point increase instead.
Tuesday's report confirmed Waller's threshold exactly. The core inflation metric rose by 0.3%. This result led bond traders to increase their forecasts for future rate hikes. The yield on the 10-year Treasury jumped to 4.99% from 4.88% late Monday. This level of yield helps determine borrowing costs for mortgages and business loans.
Higher yields pressured specific sectors. Homebuilders took the hit as rising mortgage rates deter buyers. Lennar shares fell 5.4%, while D.R. Horton dropped 3.8% and PulteGroup declined 3.9%. Builders FirstSource, a supplier of building materials, fell 4.6%.
Nvidia was the largest drag on the S&P 500, with shares falling 5.5%. The chipmaker has faced pressure since its board launched an investigation into CEO Jensen Huang. The probe stems from his relationship with a woman whom U.S. intelligence officials believe was gathering information for China. Other AI stocks showed mixed results. Broadcom gained 3.9% and Advanced Micro Devices rose 1.3%, while Micron Technology fell 1.1% and CoreWeave slipped 0.5%.
Anthropic, the company behind the Claude chatbot, filed with U.S. regulators on Tuesday to sell stock at a valuation of roughly $1.3 trillion. The filing suggests the company expects to be worth more than Walmart, JPMorgan Chase, ExxonMobil, or Coca-Cola. Meanwhile, Brent crude oil prices fell 1.2% to $91.49 per barrel. President Donald Trump said late Monday that the war in Iran is militarily effectively over, a factor that has influenced oil prices since they spiked earlier this month.
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