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US stocks fell sharply on Tuesday and the 10-year Treasury yield climbed back above 5% following a consumer price index report that showed higher-than-expected inflation in October. The S&P 500 slipped 0.7%, the Dow Jones Industrial Average dropped 249 points, and the Nasdaq Composite lost 0.9% as traders weighed the possibility of further Federal Reserve interest rate hikes.
Inflation Data and Treasury Yields
The consumer price index rose 0.4% month over month in October, surpassing the 0.3% increase anticipated by economists polled by Dow Jones. The stronger-than-expected figure reignited market fears about persistent inflation. Following the report, the yield on the 10-year Treasury note jumped more than 14 basis points to 5.004%, moving above the 5% threshold for the first time earlier this month.
Falling gasoline prices offered consumers some relief as pump prices declined by more than 4% according to the Energy Information Administration. However, Federal Reserve officials expressed growing concern that inflation pressures across other sectors of the economy remain difficult to contain. Chicago Federal Reserve President Austan Goolsbee noted at a Monday event that affordability and business costs are major concerns, adding that the artificial intelligence data center build-out is starting to resemble traditional demand overheating.
Federal Reserve Officials Call for Further Rate Hikes
Dallas Federal Reserve President Lorie Logan stated on Tuesday that she expects two more interest rate hikes will be necessary to bring inflation lower and prevent it from becoming entrenched in economic behavior. Speaking at an energy conference in Houston, Logan suggested that after two more quarter-point increases, the central bank should pause to evaluate economic and financial conditions to achieve a modestly restrictive policy that supports maximum employment and stable prices.
Earlier on Tuesday, Fed Governor Christopher Waller said he is leaning toward a quarter percentage point hike at the December policy meeting to maintain central bank credibility. Waller also raised the possibility of a larger half-point increase if inflation readings continue to come in higher than expected.
Corporate Developments and Global Markets
In corporate news, artificial intelligence lab Anthropic updated its IPO filing to set a price range of $70 to $78 per share for its upcoming offering of 825 million shares. At the high end of the range, the company could raise up to $64.35 billion and achieve a fully diluted valuation of $1.405 trillion.
Meanwhile, Nvidia shares edged higher in premarket trading as investors assessed the fallout from CEO Jensen Huang’s admission of an extramarital affair. President Donald Trump told reporters at the White House that Huang denied knowing that the woman involved was a Chinese spy, following reports that the Nvidia board launched an investigation into the matter.
In overseas trading, European shares opened higher, led by a 1.2% rise in France’s CAC 40. German chipmaker Infineon posted record fourth-quarter results and forecast annual revenue of around 20 billion euros for 2027. Asia-Pacific markets closed mostly higher, though South Korea’s Korea Exchange temporarily halted buy-side trading on the Kospi by triggering a sidecar mechanism after the index surged over 5%.
China reported that its October exports soared 35.2% and imports climbed 41.6% year over year, resulting in a narrower trade surplus of $105.3 billion, while crude oil futures extended declines as President Trump stated that fresh US strikes on Iran were unlikely.
