(Oct 15): Stocks fell the most since July as a selloff in chipmakers extended a decline that was fueled by wagers the Federal Reserve will keep lifting interest rates to fight inflation.
The broad upswing in consumer prices reinforced bets on rate hikes even if the Fed pauses in October. The S&P 500 snapped its longest streak without a 1% drop in over six years. The Russell 2000 entered a correction. A gauge of chip giants sank 4.3%. CoreWeave Inc.’s bonds hit levels that usually signal distress. Its chief said the market is acting “irrationally.”
A closely watched measure of semiconductor powerhouses such as Nvidia Corp. and Broadcom Inc. extended a six-day drop to about 12% amid mounting concerns about higher rates, lofty valuations and the massive cost of building artificial-intelligence infrastructure.
“While increased competition within AI, rising financing requirements, and higher rates may periodically add to volatility, we view this latest bout as more of a recalibration of expectations than a fundamental break in the AI investment story,” said Ulrike Hoffmann-Burchardi at UBS Chief Investment Office.
The equity retreat kindled investor demand for bonds with yields near multi-year highs. The latest inflation data had earlier triggered a plunge in Treasuries, prompting traders to briefly price in two Fed hikes by the end of January. Those bets faded. The dollar hit the highest since May 2025.
“It’s clear as ever that inflation is stubborn and moving in the wrong direction,” said Skyler Weinand at Regan Capital. “While we expect the Fed to pause on any rate changes in October, we expect rate hikes to resume in December.”
Fed Chairman Kevin Warsh has vowed not to steer markets with his own near-term outlook for monetary policy. But the inflation surprise will heighten scrutiny of his remarks late Thursday New York time in Bangkok, where he is scheduled to appear in a fireside chat with International Monetary Fund Managing Director Kristalina Georgieva.
Inflation pressures are broadening beyond energy, suggesting the last mile back to target could remain bumpy and keep rates elevated, according to Jeff Roach at LPL Financial. The latest report complicates the Fed’s decision this month as the road back to price stability is looking increasingly difficult to navigate, he added.
The question is whether firmer core inflation is enough to alter the Fed’s path, according to Seema Shah at Principal Asset Management. Markets are clearly unsettled, but the latest report is not strong enough to revive the case for an October hike, she said.
While the latest consumer price index raises concerns around inflation risks, the Fed has already communicated a gradual hiking process, according to TD Securities’ strategists including Oscar Munoz and Gennadiy Goldberg.
“Today’s report makes the chance of an October hike higher, but we still believe the Fed will hold and opt for December as the market is already doing some of the work for them,” they said.
Corporate Highlights:
- Apple Inc. is gearing up to release its artificial-intelligence platform in mainland China, following a lengthy regulatory delay that has kept the company’s AI features out of one of its most important markets.
- Nvidia Corp. Chief Executive Officer Jensen Huang said he would halt the supply of chips to a customer that was developing unsafe AI software, though he doesn’t believe that the current level of concern about the technology is warranted.
- Hewlett Packard Enterprise Co., Dell Technologies Inc. and NetApp Inc. were downgraded to equal-weight at Barclays, which cited the recent “significant” stock run and a more cautious approach on the stocks given the enterprise spending environment.
- Bank of America Corp.’s stock and fixed-income traders missed estimates as the bank’s results were also hurt by a charge tied to regulatory penalties over money laundering and sanctions violations.
- Morgan Stanley’s third-quarter profit climbed as the firm’s equity traders trounced analysts’ estimates and the wealth-management operation brought in a record amount of money.
- BlackRock Inc. pulled in US$205 billion of new money in the third quarter as revenue surged at the world’s largest asset manager, which is now a full year into a major transformation to push further into higher-fee private markets.
What Bloomberg strategists say...
“The higher-yield bogeyman has returned to haunt stocks after Wednesday morning’s inflation print, prompting traders to hide in value stocks and lower-beta sectors, which are less sensitive to index gyrations.”
—Tatiana Darie, Macro Strategist, Markets Live.
Some of the main moves in markets:
Stocks
- The S&P 500 fell 1.1% as of 4 p.m. New York time
- The Nasdaq 100 fell 2%
- The Dow Jones Industrial Average was little changed
- The MSCI World Index fell 0.9%
Currencies
- The Bloomberg Dollar Spot Index rose 0.3%
- The euro fell 0.4% to US$1.1155
- The British pound fell 0.5% to US$1.3190
- The Japanese yen was little changed at 158.37 per dollar
Cryptocurrencies
- Bitcoin fell 1.9% to US$81,789.53
- Ether fell 3.2% to US$2,428.75
Bonds
- The yield on 10-year Treasuries declined two basis points to 5.19%
- Germany’s 10-year yield was little changed at 3.47%
- Britain’s 10-year yield declined two basis points to 5.42%
Commodities
- West Texas Intermediate crude rose 1% to US$95.07 a barrel
- Spot gold fell 1.4% to US$4,100.43 an ounce
Uploaded by Jason Ng