Traders fully priced the move, lifted half-point odds to 11.8%, and drove 2-year yields higher
Traders moved to fully price a US Federal Reserve increase of at least 25 basis points for December, with expectations of a 50 basis point move climbing to 11.8 percent from no consideration at all a session earlier.
Reuters reported the repricing on Tuesday, citing CME FedWatch, and said December hike odds had stood at 84 percent on Monday.
The US consumer price index rose 0.4 percent in October, a third straight gain of 0.4 percent or more, after advancing 0.6 percent in September, the Labor Department said, per Reuters.
Economists polled by the same outlet had expected 0.3 percent.
Core CPI increased 0.3 percent against a 0.2 percent forecast from economists polled by Dow Jones, CNBC reported, adding that annual figures were withheld because of the 2025 government shutdown.
According to Reuters, Fed Governor Christopher Waller said in London before the release that the central bank should raise short-term borrowing costs in December, and should consider a half-point move if conditions worsened.
CNBC reported Waller saying the precise timing of the hikes does not matter as much as implementing them within a reasonable period.
AP quoted Waller warning that moving by only the usual quarter point could “put our credibility at risk, a risk I am not eager to take.”
Dallas Federal Reserve President Lorie Logan said the Fed needs at least two more quarter-point increases and may need to move promptly, Reuters reported, while Kansas City Federal Reserve President Jeff Schmid called the current policy rate “fairly accommodative.”
US Federal Reserve Vice Chair of Supervision Michelle Bowman stopped short of calling for hikes and said inflation was the central bank’s top priority.
Reuters put the 2-year US Treasury yield up nearly 18.9 basis points at 4.736 percent, on track for its biggest daily gain since April 9, 2025.
AP reported the 10-year yield leaped to 4.99 percent from 4.88 percent late Monday, after topping 5.30 percent in early October.
A possible Fed hike before year-end emerged as a variable for Canadian advisors following the June meeting.
The Dow Jones Industrial Average fell 157.86 points, or 0.30 percent, to 52,231.89, the S&P 500 lost 29.01 points, or 0.38 percent, to 7,520.93, and the Nasdaq Composite lost 187.26 points, or 0.74 percent, to 25,065.87, Reuters reported.
Declining issues outnumbered advancers by 2.27-to-1 on the New York Stock Exchange and 2.26-to-1 on the Nasdaq.
The S&P 500 technology sector dropped 1.4 percent as the worst performer of the 11 major sectors, per Reuters, weighed down by Nvidia, which fell 5.4 percent and has tumbled 9.6 percent over two sessions.
The same outlet put the chipmaker on track to shed more than US$470bn in market value across those sessions after it opened an internal probe into spy claims involving Chinese businesswoman Alice Huang.
“There’s an extrapolation that maybe the Fed’s going to have to hike rates more aggressively next year,” Tom Hainlin, national investment strategist at U.S. Bank Asset Management, told CNBC.
He later added, “The CPI print said perhaps inflation is going to be a little stickier for a little longer.”
Jason Ware, chief investment officer at Albion Financial Group in Salt Lake City, Utah, told Reuters that markets were spooked by the idea that “maybe it’s not 25, maybe it’s 50, and maybe the Fed’s more worried about inflation than I am, so let’s sell some stocks.”
He added, “From our perch, that is irrational.”
Anthropic’s initial public offering is expected to raise as much as US$64.4bn, giving a fully diluted valuation of up to US$1.4tn, Reuters reported.
CoreWeave closed down 0.5 percent and traded up about 2 percent after hours on revenue that topped estimates, and is down 32 percent on the year.
Warsh’s debut meeting left a 2026 hike on the table before this week’s repricing.
