U.S. stocks fell and Treasury yields jumped on Tuesday after a hotter-than-expected October inflation report pushed traders toward a Federal Reserve rate increase in December. As of about 2:50 p.m. Eastern time, the S&P 500 was down 0.4% at 7,518.95, the Nasdaq Composite was down 0.9% at 25,033.47 and the Dow Jones Industrial Average was down 0.2% at 52,262.98.
The two-year Treasury yield, which moves most closely with expectations for Fed policy, rose about 18 basis points to about 4.73%, from 4.55% on Monday. The 10-year yield rose about 12 basis points to about 4.98%, after touching 5.02% earlier in the session.
Consumer prices rose 0.4% in October, more than the 0.3% economists had forecast, the Bureau of Labor Statistics said Tuesday. Core prices, which exclude food and energy, rose 0.3%, above the 0.2% forecast. Hours before the release, Fed Governor Christopher Waller said that if core inflation came in around 0.3% or higher, a half-point rate increase should be considered at the Fed’s Dec. 8 and 9 meeting. Fed funds futures pointed to a December rate increase after the report, CNBC reported. The Fed’s target range is now 3.75% to 4%.
Stocks tied to borrowing costs were among the hardest hit. The iShares U.S. Home Construction ETF fell 2.9%, with Lennar down 4.9% and D.R. Horton down 3.5%. Nvidia fell 6.3% as its board investigates matters involving Chief Executive Jensen Huang, adding to the pressure on the Nasdaq.
