US stocks fell on Tuesday after October inflation came in hotter than expected, which raised bets on a bigger Fed rate hike, and the Nasdaq led the drop. As flagged in this morning's analysis, CPI was the day's main test, and Monday's big rally left little room for a surprise.
Prices as of 19:30 UTC. The US cash session closes at 21:00 UTC, so index levels are intraday.
- Consumer prices rose 0.4% in October against 0.3% expected, so the Fed looks more likely to keep raising rates.
- Treasury yields jumped, which hurts growth stocks most, so the Nasdaq fell the hardest.
- Nvidia added to the weakness after news of a board probe into its CEO.
The Close: Monday's Rally Fades on Hot CPI
The S&P 500 traded near 7,510, down about 0.6 percent, giving back part of Monday's 2.3 percent jump. The Nasdaq Composite slid about 1 percent to near 24,990, while the Dow lost roughly 0.3 percent.
Headline CPI rose 0.4 percent and core, which strips out food and energy, rose 0.3 percent against 0.2 percent expected. Fed Governor Waller had said he would consider a half-point hike if inflation surprised higher, and that is now back on the table.
Scenarios to watch: a push back above 7,550, Monday's close, would show buyers recovering. A move under 7,470, today's low, would deepen the pullback.
- S&P 500 near 7,510, down about 0.6%
- Nasdaq lagged because growth stocks are sensitive to yields
Story of the Day: Yields Jump and Fed Hike Odds Rise
The 10-year Treasury yield climbed back to about 5%, and the 30-year rose more than 11 basis points to about 5.37%. That is a sharp move for long-dated bonds, and it is the main reason stocks and gold both fell.
Traders still price a quarter-point hike in December as the base case, but the chance of a half-point move rose to roughly 11 percent from zero a week ago, per CME FedWatch. US bond markets are shut on Wednesday for Veterans Day, so the next reaction may come in thinner trading.
Scenarios to watch: a 10-year yield holding above 5% keeps pressure on growth stocks. A fall back under that line would ease it.
- 10-year yield about 5%, 30-year about 5.37%
- A half-point December hike is a small but growing possibility
Movers: Nvidia Slides, Oil and Gold Retreat
Nvidia fell again, about 6 percent, after the company said its board is investigating CEO Jensen Huang. Investors are waiting to see what the probe finds, and AMD and Broadcom rose while Nvidia sank.
West Texas Intermediate slipped about 1 percent to near $86, extending Monday's slide as Iran tensions stayed in focus. Gold dropped about 1.6 percent to near $4,027, because higher yields make a metal that pays no interest less attractive.
Scenarios to watch: gold needs to reclaim $4,100 to show the drop was short-lived, while oil under $85 would keep the slide going.
- Nvidia down about 6% on the board probe
- Gold fell as yields rose, oil extended its slide
Crypto Check: Bitcoin Gives Up the Morning Bounce
Bitcoin traded near $73,323 and Ether near $2,040, down about 2.6% and 4% on the UTC day. Bitcoin dropped under $74,000 right after the CPI release, and spot Bitcoin ETFs have been seeing outflows. The daily candle closes at 00:00 UTC, so these are intraday figures.
Scenarios to watch: Bitcoin back above $75,500 would ease the pressure, while a slide toward $70,000 would test the support area traders have been pointing to.
- Bitcoin near $73,323, Ether near $2,040
- Rate fears and ETF outflows weigh on sentiment
After-Hours and Overnight Watch
CoreWeave reports third-quarter results after the US close at 21:00 UTC, followed by the API oil inventory estimate at 21:30 UTC. Traders will also watch whether the 10-year yield stays near 5% into the Asian session, since it set the tone for stocks today.
- CoreWeave earnings after the 21:00 UTC close
- Bond markets are closed Wednesday for Veterans Day
Market commentary only, not investment advice. ThriveInMarkets is based in Cyprus.