Stocks joined bonds lower as a faster-than-estimated increase in inflation fueled wagers the Federal Reserve will keep lifting interest rates.
The S&P 500 halted back-to-back gains, with most of its firms dropping. Short-dated Treasuries bore the brunt of the selling, with two-year yields jumping 17 basis points to 4.73%. Money markets added to bets on at least two Fed hikes by mid-2027 — and started to price in a small chance of a jumbo-sized half-point move in December. Brent oil sank to $90.
The consumer price index, excluding food and energy, rose 0.3% from a month earlier, according to Bureau of Labor Statistics data, topping estimates for a third straight month. Overall prices jumped 0.4% as the cost of essentials climbed across the board.
“The Fed could push for a more-aggressive tightening cycle with CPI continuing to print strong,” said Lindsay Rosner at Goldman Sachs Asset Management. “A December hike is our firm base case despite wider AI jitters, and stubborn inflation means we cannot rule out further hikes in 2027.”
Before the data, Fed Governor Christopher Waller said he backed a rate hike in December, and warned that if inflation continues to accelerate he would support a half-percentage-point increase to protect the central bank’s credibility.