Inflation jumps to 3.7% as gas costs surge; Nasdaq falls nearly 2% on rate-hike fears
September consumer prices rose 3.7% from a year earlier, hotter than expected, as gasoline jumped 9.1% for the month. The Nasdaq Composite closed down 1.88% and the S&P 500 fell 1.11% as traders raised the odds of another Federal Reserve rate hike.
The CPI print: The Bureau of Labor Statistics said Wednesday that the consumer price index rose 0.6% from August and 3.7% from a year earlier, NBC News and CNBC reported. Economists polled by Dow Jones had expected a 3.6% annual increase. Core CPI, which excludes food and energy, rose 0.3% month over month and 2.6% year over year — both slightly above forecasts of 0.2% and 2.5%, CNBC reported.
What drove it: “The index for gasoline rose 9.1 percent in September, accounting for over half of the monthly all items increase,” the BLS said, according to NBC News. Housing, clothing, and restaurant and takeout food also rose. Only three major categories fell: groceries, medical care commodities and utility gas service, NBC News reported. Oil has climbed above $106 a barrel from about $80 in August, and unleaded gas is up about 45% since late February, when the U.S. and Israel launched the Iran war; diesel is up about 70% over the same stretch, NBC News said.
How stocks closed: The S&P 500 fell 1.11% to 7,718.94 — its biggest one-day drop since July 29, Reuters reported via Investing.com. The Nasdaq Composite fell 1.88% to 26,692.87, its biggest daily drop since July 23. The Dow Jones Industrial Average slipped 0.09% to 51,621.48, CNBC reported. CoreWeave fell more than 15%, Oracle nearly 9%, and chip names including AMD and Micron also dropped, CNBC said.
Banks and earnings: Bank of America shares fell about 5% after third-quarter revenue missed estimates and a day after more than $1.2 billion in federal anti-money-laundering penalties, CNBC reported. Morgan Stanley topped earnings forecasts but still closed nearly 3% lower. The S&P 500 Banks index dipped 0.7% to its lowest close since June, Investing.com’s Reuters report said.
Fed odds: Interest-rate traders priced a 37% chance of a Fed hike this month, up from 22% on Tuesday, according to CME FedWatch cited by Reuters via Investing.com. NBC News said odds of an October hike rose above 55% after the data in some market measures. National Economic Council director Kevin Hassett called the number “disappointing” on Fox Business while arguing Trump policies were helping hold inflation down, NBC News reported.
Why it matters now: Wednesday’s report is the final CPI release before the November midterm elections. Paychecks have grown about 3% on an annual basis and have not outpaced inflation since March, NBC News said. Wage growth lagging prices, plus elevated fuel costs tied to the Iran war, keep affordability at the center of the campaign.