S&P falls 1.1% after U.S. inflation exceeds forecasts in September

Key Facts

The S&P 500 fell 1.1% in the October 14 session after U.S. inflation for September came in above economists' forecasts, alongside increased bets on an interest rate hike. According to the U.S. Bureau of Labor Statistics, consumer prices rose 3.7% year on year in a release during the trading day that brought interest rate risks back into focus. Forecasts had pointed to an annual increase of 3.6%, according to the Associated Press, putting the result above economists' expectations for headline inflation that month. The agency linked pressure on artificial intelligence stocks to higher borrowing costs and the prospect of difficulty raising the financing needed for data center projects. The session's losses extended to the Nasdaq Composite, Dow Jones Industrial Average and Russell small-cap index, with marked differences in the size of their declines.

In the details of the September report, the seasonally adjusted headline consumer price index rose 0.6% month on month, according to the Bureau of Labor Statistics, with gasoline prices contributing significantly to the increase. The gasoline index jumped 9.1% during the month, and the bureau said it accounted for "more than half" of the monthly rise in the headline index, making it a major component of price movements during the period. The broader energy index rose 5.2% from the previous month, with the gasoline surge forming part of the increase in prices in this category. The index excluding food and energy recorded a seasonally adjusted monthly increase of 0.3%, below the pace of the headline index's rise in September. On an annual basis, core inflation stood at 2.6%, compared with the higher headline inflation reading, which includes food and energy prices.

In monetary policy pricing, traders put the probability of an interest rate hike at the next meeting at about 35% during the session in which the inflation report was released, according to CME Group data cited by the Associated Press. The probability priced in the previous day, October 13, was 22%, before the September consumer price reading was announced. Rate hike bets thus moved higher between the previous day and the session in which markets absorbed the above-forecast inflation result. Despite the increase, the probability of a hike remained below half in traders' pricing for the next meeting, with the interest rate decision still before the Federal Open Market Committee. This shift in bets coincided with falling stocks, bringing together index losses and an increased implied probability of monetary tightening on the day of the inflation release.

CoreWeave, which specializes in cloud computing for artificial intelligence, stood out among declining stocks, falling 15.5% in the October 14 session, according to the Associated Press. The agency placed the sector's pressure in the context of borrowing costs, linking their rise to potential difficulties raising money for artificial intelligence infrastructure projects. The financing needs discussed by the agency include building data centers, the projects facing pressure from the rising cost of obtaining funds. They also include equipping those centers with chips, tying interest rates to financing both the construction of facilities and the equipment used in artificial intelligence computing. In this context, CoreWeave's loss coincided with increased rate hike bets, while the agency's explanation of pressure on the sector focused on financing centers and chips.

Among the other indexes, the Nasdaq Composite fell 1.9% in the session, according to the Associated Press, recording a larger decline than the broader U.S. market index. The Dow Jones Industrial Average, meanwhile, fell 0.1%, leaving its loss limited compared with the Nasdaq's decline during the same trading day. The Russell 2000 small-cap index lost 1.9%, matching the Nasdaq's percentage decline, although each represents a different segment of stocks. The index results thus showed that the session's decline also encompassed small companies, alongside losses in the other major U.S. stock indexes. Despite the daily decline, the S&P 500 remained up 12.8% since the start of the year through the October 14 close, according to the agency, retaining gains for the year despite the session's losses.

The next monetary policy milestone is the Federal Open Market Committee meeting scheduled for October 27 and 28, according to the Federal Reserve's published calendar. The meeting takes place after the September reading that markets absorbed in the October 14 session and before the scheduled release of consumer prices for the following month. The October inflation report is scheduled for release on November 10, 2026, according to the U.S. Bureau of Labor Statistics calendar. The bureau set the release time at 8:30 a.m. Eastern Time, marking the publication of the next monthly consumer price reading. The October meeting therefore precedes the release of inflation for that month, while the September reading remains the latest consumer price release before that meeting under the announced publication schedule.