Stocks, Bonds Fall as CPI Data Fuel Fed-Hike Bets: Markets Wrap
(Bloomberg) — Stocks joined bonds lower as the fastest increase in inflation since April bolstered bets the Federal Reserve will keep lifting interest rates amid elevated energy costs.
A broad upswing in consumer prices reinforced expectations for rate hikes in months ahead even if the Fed decides pause in October. Those wagers extended this week’s drop in the S&P 500. A rout in chipmakers also weighed on sentiment. Short-dated Treasuries led losses, with two-year yields climbing nine basis points to 4.88%. The dollar hit the highest since May 2025.
The consumer price index rose 0.6% in September from a month earlier, driven by a surge in fuel costs. A key measure of underlying price pressures, which excludes food and energy, was up 0.3%.
“It’s clear as ever that inflation is stubborn and moving in the wrong direction,” according to Skyler Weinand at Regan Capital. “While we expect the Fed to pause on any rate changes in October, we expect rate hikes to resume in December.”
Wednesday’s report, which also showed the CPI advanced 3.7% from a year earlier and core CPI rose 2.6%, came ahead of the central bank’s Oct. 27-28 policy meeting. Fed Chair Kevin Warsh is due to speak late Thursday New York time from Bangkok.
Inflation pressures are broadening beyond energy, suggesting the last mile back to target could remain bumpy and keep rates elevated, according to Jeff Roach at LPL Financial. The latest report complicates the Fed’s decision this month as the road back to price stability is looking increasingly difficult to navigate, he added.
Money markets boosted bets on rate increase in October, with two Fed hikes almost fully priced in by the end of January.
The question is whether firmer core inflation is enough to alter the Fed’s path, according to Seema Shah at Principal Asset Management. Markets are clearly unsettled, but the latest report is not strong enough to revive the case for an October hike, she said.
“The Fed is still likely to wait until December to hike again,” said Brian Jacobsen at Annex Wealth Management. “A lot can happen between now and then. The longer energy inflation stays elevated, the more likely it seeps into core inflation, so it’s a make-or-break moment for seeing whether the oil shock becomes a more systemic problem.”
While the warmer core CPI release bolsters the case for additional rate hikes, recent dovish Fedspeak suggests the bar is high for an immediate rate boost, according to Jeff Schulze at Franklin Templeton Institute.
“Overall, it was a troubling round of inflation data that undermines the argument for a gradual pace of future rate hikes,” said Vail Hartman at BMO Capital Markets. “That being said, CPI by no means locks in an October rate hike.”
Corporate Highlights:
Bank of America Corp.’s stock and fixed-income traders missed estimates as the bank’s results were also hurt by a charge tied to regulatory penalties over money laundering and sanctions violations. Morgan Stanley’s third-quarter profit climbed as the firm’s equity traders trounced analysts’ estimates and the wealth-management operation brought in a record amount of money. BlackRock Inc. pulled in $205 billion of new money in the third quarter as revenue surged at the world’s largest asset manager, which is now a full year into a major transformation to push further into higher-fee private markets. Anthropic PBC was set to meet prospective investors in preparation for its initial public offering, according to people familiar with the matter. Hewlett Packard Enterprise Co., Dell Technologies Inc. and NetApp Inc. were downgraded to equal-weight at Barclays, which cited the recent “significant” stock run and a more cautious approach on the stocks given the enterprise spending environment. What Bloomberg strategists say…
“The higher-yield bogeyman has returned to haunt stocks after Wednesday morning’s inflation print, prompting traders to hide in value stocks and lower-beta sectors, which are less sensitive to index gyrations.”
—Tatiana Darie, Macro Strategist, Markets Live. For the full analysis, click here.
Some of the main moves in markets:
Stocks
The S&P 500 fell 0.7% as of 11 a.m. New York time The Nasdaq 100 fell 1% The Dow Jones Industrial Average was little changed The Stoxx Europe 600 rose 0.4% The MSCI World Index fell 0.6% Currencies
The Bloomberg Dollar Spot Index rose 0.5% The euro fell 0.7% to $1.1122 The British pound fell 0.7% to $1.3159 The Japanese yen fell 0.3% to 158.84 per dollar Cryptocurrencies
Bitcoin fell 1.8% to $81,827.9 Ether fell 3.3% to $2,426.56 Bonds
The yield on 10-year Treasuries advanced five basis points to 5.26% Germany’s 10-year yield was little changed at 3.47% Britain’s 10-year yield declined two basis points to 5.43% Commodities
West Texas Intermediate crude rose 0.9% to $94.98 a barrel Spot gold fell 1.6% to $4,093.74 an ounce ©2026 Bloomberg L.P.
