U.S. stocks fall 0.7% as inflation tops forecasts and rate-hike bets rise

Key Facts

U.S. stocks closed lower on November 10 after Labor Department data showed the Consumer Price Index rose 0.4% in October, exceeding economists’ 0.3% estimate in a Reuters poll. The reading coincided with Federal Reserve Governor Christopher Waller’s warning that core inflation holding at 0.3% a month or higher could warrant considering a 50-basis-point rate increase at the December meeting. Waller said he currently leaned toward supporting a 25-basis-point increase at that meeting, even if inflation improved. The divergence between data and remarks repriced monetary policy expectations and lifted bond yields, weighing on major indexes and technology stocks. The CPI rose 0.6% in September, while October marked a third consecutive monthly increase of at least 0.4%, Reuters reported.

The core CPI, which excludes food and energy, rose 0.3% in October, above the market consensus of 0.2%, Reuters reported. The increase matched the rate recorded in the previous two months, leaving monthly core inflation at the level Waller linked to the possibility of discussing greater tightening. In his speech, the official said a core reading “around 0.3% or higher” could make a 50-basis-point increase an option to consider in December. He said he currently leaned toward a 25-basis-point increase, even if inflation improved, putting the next reading among the factors influencing discussion within the Federal Open Market Committee. Waller noted that September data, which preceded the October report, were strong: the Personal Consumption Expenditures price index, the committee’s preferred inflation gauge, rose 0.5% monthly and 3.7% annually. Core PCE rose 0.3% monthly and 3.1% year over year in September.

Higher inflation and shifting rate expectations quickly fed into market pricing, with markets fully pricing in an increase of at least 25 basis points at the December meeting, compared with an 84% probability on Monday, according to the CME FedWatch tool, as reported by Reuters. The yield on two-year U.S. Treasury notes jumped 19.1 basis points to 4.738% on November 10 and was on track for its biggest daily gain since April 9, 2025, Reuters reported. The 10-year Treasury yield also rose to 5.01%, from 4.88% late Monday, according to the Associated Press. The yield moves highlight the bond market’s response to expectations that monetary policy will remain tight, alongside the decline in stocks. Reuters said the dollar rose against major currencies, while gold fell sharply as Treasury yields climbed after the higher-than-expected inflation reading.

The S&P 500 ended the session down 0.4%, the Nasdaq Composite fell 0.7%, and the Dow Jones lost 0.3%, according to the Associated Press. Nvidia was the biggest single drag on the S&P 500 after its shares fell 6.3% during the November 10 session, the agency reported. The Associated Press attributed the decline to the company’s board investigating its chief executive, as well as broader concerns about data-center constraints and valuations of artificial-intelligence stocks. The Nasdaq, which includes major technology companies, fell in a session marked by a sharp rise in bond yields and increased bets on rate hikes. Inflation pressures, financing costs and sector concerns thus combined to push U.S. indexes to losses at the close.

Among inflation components, the used cars and trucks index fell 1.2% in October, after rising 0.7% in September, according to Bureau of Labor Statistics data. The decline tempered monthly pressure from that component, but came in a month when the overall index accelerated to 0.4% after a 0.6% increase in the previous month. Inflation expert Ricardo Treitzi estimated, using rough estimates for past October data that were unavailable, that headline inflation was 4% year over year in October, compared with 3.7% in September. He estimated annual core inflation at 2.8%, versus 2.6% in September, according to the Associated Press. These figures remain Treitzi’s estimates based on rough data, while the official monthly core CPI reading was 0.3% in October.

EL7 data show the core CPI reading was 339.9 on November 10, compared with a previous reading of 338.9 on October 14. The two readings provide the index level recorded in the current release and its previous comparison, alongside the monthly changes announced by the Bureau of Labor Statistics and reported by Reuters. The next U.S. inflation test on the official data calendar is the October Producer Price Index, scheduled for Friday, November 13, at 08:30 a.m. Eastern Time, according to the bureau’s calendar. The November CPI report is scheduled for December 10 at 8:30 a.m. Eastern Time, according to the Bureau of Labor Statistics. Those dates follow a session in which the October reading and accompanying remarks redirected investors’ expectations for the Fed’s December decision.