Wall St down as inflation data heightens rate jitters

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US stocks have closed lower, as a hotter-than-expected inflation reading hardened expectations for a rate ‌hike from the Federal Reserve in December and fuelled concerns the…

US stocks have closed lower, as a hotter-than-expected inflation reading hardened expectations for a rate ‌hike from the Federal Reserve in December and fuelled concerns the central bank may be more aggressive in raising rates.

The Labor Department said the Consumer Price Index increased 0.4 per cent in October, its third straight gain of 0.4 per cent or more ‌and above the 0.3 per cent estimate of economists polled by Reuters, after advancing 0.6 per cent in September.

The data came after Fed Governor Christopher Waller said the central bank should raise short-term borrowing costs in December even if data showed inflation cooled last month, and should consider an ‌upsized half-point rate hike if the inflation picture worsens.

Markets are now completely pricing in a rate hike of at least 25 basis points at the Fed's December meeting, according to CME FedWatch, up from 84 per cent on Monday, while expectations for a 50 basis point increase climbed to 11.8 per cent after garnering no consideration at all in the prior session.

The two-year US Treasury yield, which typically moves in step with interest rate expectations for the Fed, surged nearly 18.9 basis points to 4.736 per cent and was poised for its biggest daily gain since April 9, 2025, after US President Donald Trump launched sweeping global tariffs.

The jump in yields has come even as oil prices have eased to two-month lows as US officials have downplayed any imminent military ‌actions against Iran.

"What kind ‌of has the market spooked a ⁠little bit is this idea of, 'Well, we were already pricing in a December hike ... but maybe it's not 25, maybe it's 50, and maybe the Fed's ​more worried about inflation than I am, so let's sell some stocks,'" said Jason Ware, chief investment officer at Albion Financial Group in Salt Lake City, Utah.

"From our perch, that is irrational. The thing that has pushed CPI up over the last six months and has the Fed a little bit more concerned and therefore has restarted hiking rates is…

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