U.S. equities ended the day lower on Tuesday after a hotter‑than‑expected consumer price index (CPI) report and dovish‑to‑hawkish remarks from Federal Reserve Governor Christopher Waller raised market expectations of a larger rate hike in December. The benchmark S&P 500 slipped 0.4% to close at 7,522.82 points, the Dow Jones Industrial Average fell 0.3% to 52,233.32, and the Nasdaq Composite dropped 0.7% to 25,065.87, marking the worst weekly performance for the S&P since April 2025 but a modest rebound from the previous session’s strong gains.
The October headline CPI increased 0.4% month‑over‑month, outpacing the 0.3% consensus forecast, while core CPI, which excludes food and energy, remained steady at 0.3% month‑over‑month, also above the 0.2% estimate. No year‑over‑year figures were released due to a U.S. government shutdown that began in October 2025. Following the data, the CME FedWatch tool showed the probability of a 50‑basis‑point Fed rate hike in December rising to nearly 10%.
Waller, speaking from London, reiterated his support for raising rates even if inflation cooled, adding that a deeper half‑point increase could be justified if data remained hot. His comments, combined with the CPI surprise, prompted a sharp move in Treasury markets: the 10‑year yield jumped 12.9 basis points to 4.992%, briefly reclaiming the 5% level for the first time since late October, while the 2‑year yield surged 18.4 basis points to 4.731%. The U.S. dollar index gained 0.6% against a basket of major currencies.
Earlier in the week, Wall Street had posted its strongest single‑day gains since April 8, with the Nasdaq up 2.7%, the Dow up 2.2% and the S&P up 2.4% as technology shares rebounded from a steep sell‑off driven by concerns over AI spending and the outcome of the recent midterm elections. Semiconductor stocks led the recovery, with the Philadelphia Semiconductor Index climbing nearly 7%; AMD surged over 13% and Broadcom rose 8.8%, while Nvidia fell 4.2% to its lowest close since April 7 amid speculation that CEO Jensen Huang might be the target of a Chinese espionage effort.
Market participants noted that despite the hotter CPI, investors remain focused on the pending producer price index (PPI) release later in the week and the personal consumption expenditures (PCE) price index later in the month, both of which are closely watched by the Fed. RSM US chief economist Joseph Brusuelas highlighted that the CPI details show pass‑through from higher oil, gasoline, diesel, transportation services, and food‑at‑home prices, warning that sticky inflation could persist. Baird Private Wealth Management strategist Michael Antonelli added that markets are still digesting Nvidia news, midterm election outcomes, and the broader AI trade, which continues to dominate price action.
Lower oil prices provided some relief to equities on Monday, and former President Donald Trump indicated that further strikes against Iran were unlikely as diplomatic efforts continued.
In corporate news, AI startup Anthropic began formally marketing its initial public offering. The filing with the U.S. Securities and Exchange Commission disclosed a base share price range of $70 to $78, which would value the company at up to $64.4 billion on a fully diluted basis, potentially reaching $1.4 trillion when accounting for restricted shares, charitable donations, and employee stock options. Anthropic also plans a $26 billion private placement with cornerstone investors that include Alphabet’s Google, Nvidia, AMD, Broadcom, Micron Technology, Microsoft, and Taiwan Semiconductor Manufacturing Co.
Investors will watch upcoming earnings from AI‑related firms such as CoreWeave, Cisco Systems, and Applied Materials for further clues on data‑center and computing‑infrastructure spending.