Stock Market Today: Yields Jump as Inflation Comes in Hotter Than Expected

The October core inflation reading of 0.3% month-over-month, reported by the Bureau of Labor Statistics and cited by Reuters, came in hotter than the 0.2% economists expected. That single number sent two-year Treasury yields up 18 basis points overnight and pushed the probability of a 50-basis-point rate increase at the Fed's December meeting to roughly 10%, with three quarter-point moves fully priced in by mid-2027.

Fed officials reacted swiftly. Governor Christopher Waller said before the data that a 0.3% core print would prompt him to consider a half-point hike. Dallas Fed President Lorie Logan said two more rate rises were needed, possibly rapidly. Chicago Fed President Austan Goolsbee warned of a "real inflation issue" on hand, while Philadelphia Fed President Anna Paulson called for gradual hikes. The chorus of hawkish rhetoric drove the dollar index up 0.5% overnight to 102.29.

Equity markets initially sold off on Tuesday, with the Dow, S&P 500, and Nasdaq closing lower as yields climbed, according to MarketWatch. But Asian stocks rallied Wednesday after CoreWeave, an AI infrastructure firm backed by Nvidia, posted strong quarterly results and said it would be profitable in the first half of 2028. MSCI's Asia-Pacific index jumped 1.9%, led by a 2.6% rise in South Korea and a 3% gain in Taiwan. Nasdaq futures rose 1.4% and S&P 500 futures gained 0.6% on the CoreWeave news.

The stronger dollar pressured gold, which fell 2.6% overnight before recovering to $4,061.56 an ounce. The Australian dollar dropped nearly 0.9% as traders bet its central bank is done tightening after five rate hikes this year. Oil rebounded, with Brent crude rising 0.8% to $92.26 a barrel after two days of losses driven by hopes the Iran war would de-escalate following the US midterm elections.

SoftBank Group shares recouped earlier losses to finish flat despite a $7 billion net loss in the second quarter, hit by heavy spending on US data centers. Nvidia shares steadied after two days of steep losses that wiped $430 billion off its market value; CEO Jensen Huang is under investigation over reports he may have been targeted by a foreign intelligence operation linked to an alleged Chinese spy. Anthropic is pressing ahead with an IPO at a $1.4 trillion valuation, a key test of Wall Street's faith in the AI boom.

Traders now face a calendar packed with catalysts: the Fed's December 15-16 meeting, the upcoming Anthropic listing, and the fallout from the midterm elections that handed Democrats a victory. Andrew Lilley, chief rates strategist at Barrenjoey, said, "This Fed is finally doing what every other Fed would have done in this situation, which is hike and hike quickly." He added that at least four or five policymakers may favor a 50-basis-point move, and "you cannot rule it out."