Hot Inflation Revives Fed Rate-Hike Fears, Pressuring U.S. Stocks

Wall Street’s latest pullback was driven by a hotter-than-expected inflation reading and renewed concern that the Federal Reserve could raise interest rates more aggressively in December. The S&P 500 fell 0.4%, the Dow Jones Industrial Average declined 0.3% and the Nasdaq Composite lost 0.7% on Tuesday, according to Reuters coverage.

Inflation revives rate fears

The inflation report showed prices were higher than economists expected, prompting traders to raise their expectations for further rate increases. Treasury yields moved higher, with the 10-year yield briefly rising above 5% during Tuesday’s session, Yahoo Finance reported.

Federal Reserve officials added to the pressure. Governor Christopher Waller said the central bank should raise short-term borrowing costs in December even if inflation had cooled, while also saying a half-point increase should be considered if the inflation outlook worsened, according to Reuters. Dallas Fed President Lorie Logan separately said persistent inflation could warrant at least two additional quarter-point increases, Zacks reported.

Technology bears the pressure

The S&P 500 technology sector dropped 1.4%, making it the weakest of the 11 major sectors. Nvidia fell 5.4% and had declined 9.6% across the prior two sessions, adding to pressure on the Nasdaq, Reuters reported.

U.S. stock futures were higher Wednesday as Nvidia rebounded and investors reassessed the outlook for the next Fed decision. Nvidia-backed CoreWeave rose nearly 13% in premarket trading after reporting better-than-expected quarterly revenue and raising its revenue outlook, according to TheStreet.

What to watch

Investors will focus on additional inflation data, Treasury-yield moves and comments from Federal Reserve officials for evidence of whether December rate expectations continue to harden. The market will also monitor whether the rebound in Nvidia and CoreWeave extends beyond premarket trading or remains concentrated in AI-linked shares.