All it took to stop the stock market’s big rebound was some hot inflation data.
The Nasdaq Composite fell 0.7%, while the S&P 500 dropped 0.4%. The Dow Jones Industrial Average fell 156 points, or 0.3%.
After rallying hard on Monday in the wake of last week’s losses, the stock market’s dip-buying spree hit a roadblock in the form of the October CPI. The inflation data came in hotter than economists anticipated, dialing up the pressure on the Federal Reserve to raise interest rates.
The debate has shifted from whether the Fed will raise rates next month to whether it will opt for a half a point hike as soon as December.
“It has been a crazy week, and indeed a fairly tumultuous couple of months, as markets have had to reevaluate evolving AI-related stories, election results, Mideast war dynamics, etc., and for a time inflation had been pushed to the side as a real-time relevant news story,” writes Rick Rieder, BlackRock’s chief investment officer of global fixed income.
With odds of a half-point December hike in the wake of the CPI up to 9.5% from zero, according to the CME Fed Watch Tool, the yield on the 2-year Treasury note rose to 4.73%. The 10-year yield was up to 4.98%.
Today’ s action was a reminder for traders that interest rates and bond yields matter. Of course, earnings from CoreWeave, set to be released imminently, could put the AI debt story back on the front burner. Whether that’s good for the market’s momentum remains to be seen.
