U.S. stocks closed sharply lower Wednesday after a hotter-than-expected inflation report revived concerns that the Federal Reserve could raise interest rates again. Reuters reported that the S&P 500 fell 1.11% to 7,718.94, its biggest one-day decline since July 29, while the Nasdaq dropped 1.88% to 26,692.87, its largest daily loss since July 23. The Dow slipped 0.09%.
Inflation puts rate hikes back in view
The Bureau of Labor Statistics reported that consumer prices rose 0.6% in September and 3.7% from a year earlier, accelerating from a 3.4% annual rate in August. Gasoline prices jumped 9.1% during the month and accounted for more than half of the overall increase.
Core prices, which exclude food and energy, rose 0.3% for the month and 2.6% over the year. Reuters said interest-rate traders put the chance of an October Fed increase at 37%, up from 22% a day earlier. That reflected changing market expectations, not a decision by the central bank.
AI stocks absorb the sharpest losses
The prospect of higher borrowing costs weighed heavily on companies tied to the capital-intensive AI buildout. Reuters reported Oracle fell 8.8%, while CoreWeave and Nebius lost 15% and 10%, respectively.
Dell declined 11.4% and Hewlett Packard Enterprise fell 8.2% after Barclays downgraded both AI-server makers. The Philadelphia Semiconductor Index dropped 4.3% for its sixth straight losing session, its longest such streak since May 2025.
The selloff was broad enough to pull eight of the S&P 500's 11 sectors lower, led by a 2.6% decline in information technology. Even after Wednesday's retreat, Reuters said the S&P 500 remained up nearly 13% for 2026, with much of that gain fueled by AI-related stocks.
