U.S. stocks ended lower on Tuesday after a hotter-than-expected consumer price report strengthened the case for a Federal Reserve rate hike in December. Treasury yields jumped on the news, with the 10-year yield moving close to 5%, and a steep drop in Nvidia added extra pressure to the tech-heavy Nasdaq. The losses were orderly rather than dramatic, but the session marked a clear reversal from Monday’s gains.
What Moved Markets
The Dow Jones Industrial Average fell 157.86 points, or 0.30%, to close at 52,231.89. The S&P 500 slipped 29.01 points, or 0.38%, to 7,520.93, while the Nasdaq Composite dropped 187.26 points, or 0.74%, to 25,065.88. Smaller companies also struggled, with the Russell 2000 losing 0.60%.
The main catalyst was the October Consumer Price Index (CPI), the government’s key measure of what consumers pay for everyday goods and services. Headline prices rose 0.4% for the month, above the 0.3% economists had expected. Core CPI, which strips out volatile food and energy costs and is watched closely by the Fed, climbed 0.3% versus a 0.2% forecast. That marks the third straight monthly core gain of 0.3%, a sign that underlying inflation is not cooling as quickly as policymakers would like.
Bond markets reacted quickly. The yield on the 2-year Treasury note, which is especially sensitive to Fed policy, jumped about 19 basis points to 4.74%, while the 10-year yield rose about 13 basis points to roughly 4.99%, its highest level since late October. (A basis point is one hundredth of a percentage point.) Higher yields tend to weigh on stock valuations, particularly for fast-growing tech names. Futures markets now price in a December rate hike as very likely, and Fed Governor Christopher Waller said earlier in the day that he would support a quarter-point increase, adding that a larger half-point move “should be considered” if core inflation stayed firm.
Notable Movers
Nvidia (NASDAQ:NVDA) was the biggest drag on the major averages, falling 9.78 dollars, or 5.47%, to close at 168.89. Shares came under pressure after reports that the company’s board is investigating CEO Jensen Huang over an alleged relationship with a Singapore cloud-company executive, and a shareholder lawsuit followed. The stock was the Dow’s worst performer for a second straight session and is down nearly 30% since early October.
AAON (NASDAQ:AAON) was one of the day’s standout gainers, surging by double digits after the heating and cooling equipment maker beat third-quarter expectations and raised its full-year outlook.
Take-Two Interactive (NASDAQ:TTWO) moved higher after its CEO said pre-orders for Grand Theft Auto VI are “tracking far in excess” of initial expectations, helping investors look past a decline in quarterly revenue.
GFL Environmental (NYSE:GFL) tumbled after its board unanimously rejected a roughly $22 billion take-private offer from a consortium that included Blackstone and KKR, removing the prospect of a near-term buyout premium.
Skydance (SKYD) also fell sharply after reporting weak third-quarter results and a soft near-term profit outlook, with investors focused on the debt load from its Warner Bros. Discovery merger.
Looking Ahead
The bond market will be closed Wednesday for Veterans Day, though stocks will trade regular hours, which may make for a quieter session. Investors will be listening for more comments from Fed officials as they weigh how far the central bank may go in December. After Tuesday’s close, results from CoreWeave (NASDAQ:CRWV) could set the tone for AI-related names. Traders are also keeping an eye on the upcoming Anthropic IPO, which updated its filing on Tuesday to target a price of $70 to $78 per share and could begin trading as early as next week.