US equity markets fell on Wednesday after hotter-than-expected September consumer price index data strengthened expectations that the Federal Reserve may keep monetary policy tighter for longer or raise interest rates again. The S&P 500 dropped 1.08% to 7,721.49, while the Nasdaq Composite lost 1.85% to 26,701.48. The Dow Jones Industrial Average slipped only 0.09%, or 45.23 points, to 51,624.87, as gains in healthcare stocks helped limit losses.
Inflation accelerated to 3.7% year-over-year, above the 3.6% consensus. Monthly CPI rose 0.6% in September, while core CPI increased 0.3% on the month and 2.6% annually, exceeding forecasts of 0.2% and 2.5%. Rising gasoline prices accounted for more than half of the monthly headline increase, and price pressures broadened beyond energy.
According to CME's FedWatch tool, traders priced in a 32.7% probability of an October rate hike, up from 22% the previous day. Higher borrowing-cost expectations hit rate-sensitive technology shares particularly hard.
Oracle fell about 9%, CoreWeave plunged more than 16%, and Nebius declined. Among chipmakers, Advanced Micro Devices dropped 5%, Intel and SanDisk fell 4%, and Micron Technology lost 3%. The Philadelphia Semiconductor Index fell for a sixth straight session, its longest losing streak since May 2025. Dell and Hewlett Packard Enterprise also slid after Barclays downgraded both AI server makers to Equal Weight from Overweight.
Financial stocks added to the pressure. Bank of America shares fell 5% after third-quarter revenue missed expectations and the bank set aside more than $1.2 billion for regulatory penalties related to suspicious-transaction detection. Morgan Stanley dropped nearly 4% despite better-than-expected quarterly results. The S&P 500 Banks Index reached its lowest level in more than four months.
Despite the selloff, the S&P 500 remained more than 12% higher in 2026 after hitting a record high the previous week, though breadth remained weak: the median stock in the index had gained just 4% for the year, and more than 200 components were in negative territory.
For digital asset markets, the hotter CPI print and rising Fed rate-hike odds may act as a headwind, as crypto often behaves like a risk asset sensitive to liquidity conditions.
