Stocks fell on Tuesday after the October inflation report came in hotter than economists expected, handing back part of Monday’s big rally and putting a larger Federal Reserve rate hike squarely on the table for December.
The consumer price index rose 0.4% in October from a month earlier, the Bureau of Labor Statistics said Tuesday, above the 0.3% increase economists had forecast. Core prices, which strip out food and energy, rose 0.3%, also a tenth of a point above forecasts. Hours earlier, Fed Governor Christopher Waller had said in London that a core reading of 0.3% or higher was exactly the kind of number that could justify a half-point hike next month.
Inflation ran hotter than forecast
October’s 0.4% rise was smaller than September’s 0.6% jump, but forecasters had expected price growth to slow more than it did. The core reading is the one the Fed watches most closely, and core prices have now risen 0.3% for three straight months, a pace that runs well above the central bank’s 2% annual target.
Shelter costs rose 0.3% and accounted for more than 30% of the monthly increase, according to the BLS. Energy prices rose 0.7%, a far smaller gain than in September, when fuel costs surged. For households, the report means the cost of rent, groceries and everyday goods is still climbing faster than the Fed wants to see.
One thing the report did not include was an annual inflation rate. The BLS published no 12-month figure for October because it never collected prices in October 2025, when last year’s government shutdown halted its surveys. Private economists filled the gap with estimates of their own: Capital Economics put annual inflation at close to 4%, up from September’s official rate of 3.7%.
Stocks gave back part of Monday’s rally
The S&P 500 fell 0.4% to about 7,521, according to the Associated Press. The Dow Jones Industrial Average fell 0.3%, and the Nasdaq composite fell 0.7% to about 25,067. The losses ran deeper earlier in the day, when the Nasdaq was down as much as 1.7%, before buyers stepped in and lifted the indexes well off their lows by the close.
The pullback came a day after the Dow jumped 1,104 points, its best day since April, helped by hopes that a softer inflation reading would keep the Fed on a gentler path. Our preview of the report and Monday’s rally laid out what markets were watching. Chipmaker Nvidia fell 5.5% for a second straight day and was the Dow’s biggest decliner, keeping pressure on technology shares.
Bond prices fell too. The yield on the 10-year Treasury note, which moves in the opposite direction to its price and helps set mortgage rates across the country, climbed to 4.98% from 4.90% on Monday, after touching 5.03% during the day. Bond trading pauses on Wednesday for the Veterans Day holiday, while the stock market remains open.
Waller had already drawn the line
Speaking in London on Tuesday morning, before the data landed, Waller said he would back another rate increase at the Fed’s December meeting. He went further: if core inflation came in around 0.3% or higher, he said, a stronger policy move might be needed, and a half-percentage-point increase should be considered for December.
Core inflation printed exactly 0.3%. A December hike is now widely expected, and the argument after Tuesday is about its size. The October report was also the last CPI release before the Fed meets on December 8 and 9. The November report is not due until December 10, the day after the meeting ends, so officials will make the December call with Tuesday’s hot reading as their freshest inflation data.
Bitcoin felt the squeeze too
Crypto markets took the same hit. Bitcoin slid to about $73,518 at Tuesday’s Wall Street open, its weakest level since August 21 and close to the low it set on Sunday, according to TradingView data reported by Cointelegraph. It later climbed back above $74,000. About $178 million in leveraged bets on higher prices were wiped out in the hour after the report, KuCoin reported, a sign of how quickly traders cut risk once a bigger rate hike came into view.
Sources: Bureau of Labor Statistics; Associated Press; Barron’s; CNN; Investopedia; Cointelegraph; KuCoin. More coverage in our Business section.