Wall Street fell on Tuesday after October inflation came in hotter than expected, reviving talk of a larger Federal Reserve rate rise in December. The Dow Jones Industrial Average fell 302.62 points, or 0.57%, to 52,087.13, the S&P 500 dropped 53.31 points, or 0.71%, to 7,496.63, and the Nasdaq Composite lost 227.31 points, or 0.90%, to 25,025.83.

The US Bureau of Labor Statistics reported that consumer prices rose 0.4% in October, above the 0.3% rise economists polled by Reuters had forecast, although down from 0.6% in September. Core inflation, which excludes food and energy, rose 0.3%, above the 0.2% consensus. The bureau could not publish annual inflation rates this time because October 2025 prices were never collected during last year's government shutdown.

Treasury yields jump towards 5%

The yield on the benchmark 10-year Treasury note rose 12.76 basis points to 4.988%, and it had been quoted at 5.00% late on Tuesday afternoon, up from 4.88% on Monday. The two-year note yield, which moves closely with Fed rate expectations, rose 19.28 basis points to 4.74%, on track for its biggest one-day jump since the April 2025 tariff sell-off. Fed Governor Christopher Waller said earlier in the day that a core reading of 0.3% would prompt him to consider a half-point rise at the Fed's 8-9 December meeting, while Dallas Fed President Lorie Logan said the central bank needs at least two more quarter-point rises.

Tuesday's fall gave back part of Monday's sharp rally, when the Dow gained 2.15%, the S&P 500 rose 2.35% and the Nasdaq climbed 2.74% as stocks bounced back from a sell-off tied to worries about AI regulation after the Democratic sweep in the US midterm elections. MSCI's gauge of stocks across the globe fell 0.21% to 1,106.21, while the pan-European STOXX 600 index rose 0.4%.

Dollar and gold move as rate bets shift

The dollar gained against major currencies, with the dollar index up 0.6% at 102.29 and the euro down 0.56% at $1.1156. Gold fell sharply after the inflation data, with spot gold down 2.3% at $4,043.73 an ounce. Oil also fell to fresh two-month lows as US officials played down the need for further military action against Iran, with US crude down 1.39% at $85.67 a barrel and Brent at $90.69, down 2.03% on the day.

Investors now face a quieter Wednesday: it is Veterans Day, US stock markets trade as normal but the bond market is closed, so the next read on interest rates will come from equities alone. Earnings from CoreWeave will test worries about the cost of the AI buildout, and US producer price figures are due on Friday.