Stocks Sharply Lower on Inflation Woes and Slumping Chipmakers
The S&P 500 Index ($SPX) (SPY) closed down by -1.11% on Wednesday, the Dow Jones Industrial Average ($DOWI) (DIA) closed down by -0.09%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed down -2.02%. December E-mini S&P futures (ESZ26) fell -1.16%, and December E-mini Nasdaq futures (NQZ26) fell -2.10%.
Stock indexes sold off sharply on Wednesday, with the S&P 500 falling to a 1.5-week low and the Nasdaq 100 dropping to a 3.5-week low. Inflation woes dampened market sentiment and sparked stock liquidation on Wednesday after US September consumer prices rose more than expected, reinforcing speculation that the Fed will keep interest rates higher for longer amid sticky price pressures. The chance of a 25 bp Fed rate hike at this month’s FOMC meeting rose to 37% from 22% before the CPI report. Also, the rout in chipmakers continued Wednesday, weighing on the overall market.
Wednesday’s broader market slump sparked defensive buying of health care and pharmaceutical stocks, limiting losses in the Dow Jones industrials.
US Sep CPI rose +3.7% y/y, stronger than expectations of +3.6% y/y. Sep core CPI rose +2.6% y/y, stronger than expectations of 2.5% y/y.
The Fed Beige Book was hawkish, noting that a majority of the twelve Fed districts in the six weeks through October 5 reported economic growth, and half saw robust or intensifying price pressures.
Stocks and bonds garnered some support Wednesday on comments from Fed Vice Chair Michelle Bowman, who signaled she favors keeping Fed policy steady at this month's FOMC meeting when she said, "We have some time to wait and see how financial conditions and the economy evolve before we decide that we need to take any more action" on interest rates.
US MBA mortgage applications fell -2.7% in the week ended October 9, with the purchase mortgage sub-index down -4.0% and the refinancing mortgage sub-index down -0.4%. The average 30-year fixed-rate mortgage rose +1 bp to a 2.75-year high of 7.50% from 7.49% the prior week.
China's trade news was better than expected, supporting global growth prospects. China's Sep exports rose +36.3% y/y, stronger than expectations of +25.7% y/y and the most in 7 months. Sep imports rose +31.0% y/y, stronger than expectations of +25.0% y/y.
Stocks have support from the prospect of solid quarterly earnings results starting this week. Goldman Sachs on Monday raised its three-month view on global equity markets to overweight from neutral, saying. “Earnings growth remains supportive for equities and the recent valuation de-rating has improved asymmetry into the third-quarter earnings season.” According to data compiled by Bloomberg Intelligence, Q3 S&P 500 earnings are expected to climb by +25% from a year earlier, up from a July estimate of 22%.
Nov WTI crude oil prices (CLX26) closed up more than +1% on Wednesday as Yemen's Houthi rebels launched multiple drone and missile attacks across Saudi Arabia, including energy infrastructure. Also, Iranian attacks on shipping attempting to transit the Strait of Hormuz have increased in recent weeks, threatening a rebound in energy supplies from the Middle East.
Markets are discounting a 37% chance of a +25 bp Fed rate hike at the next FOMC meeting on October 27-28.
Overseas stock markets settled mixed on Wednesday. The Euro Stoxx 50 closed up +0.38%. China's Shanghai Composite closed down -0.89%. Japan's Nikkei-225 Stock Average closed down -0.05%.
Interest Rates
December 10-year T-notes (ZNZ6) closed up by +4.5 ticks on Wednesday. The 10-year T-note yield fell -2.5 bp to 5.183%. T-note prices recovered from early losses on Wednesday and settled higher as a slump in equity markets fueled short-covering in T-notes. Also, dovish comments on Wednesday from Fed Vice Chair Bowman were bullish for T-notes when said she sees no urgent need for the Fed to raise interest rates.
T-notes initially retreated on Wednesday on the stronger-than-expected US Sep CPI report, which boosted the chance of a Fed rate hike later this month to 37% from 22% before the report. Also, Wednesday’s +1% increase in WTI crude oil has raised inflation expectations and is bearish for T-notes. In addition, the Fed Beige Book was negative for T-notes, noting intensifying price pressures in more than half of the Fed’s districts.
European government bond yields moved lower on Wednesday. The 10-year German bund yield fell -0.3 bp to 3.466%. The 10-year UK gilt yield fell -2.3 bp to 5.424%.
The German Sep wholesale price index rose +8.7% y/y from +6.8% y/y in Aug, the strongest pace of increase in nearly 3.5 years.
Markets are discounting a 12% chance of a +25 bp ECB rate hike at the ECB’s next meeting on October 29.
US Stock Movers
Chipmakers and AI-infrastructure stocks sold off Wednesday, weighing on the overall market. The iShares Semiconductor ETF (SOXX) fell to a 3.5-week low and closed down more than -4%. CoreWeave closed down more than -15% to lead losers in the Nasdaq 100, and Lumentum Holdings (LITE) closed down more than -8%. Also, Marvell Technology (MRVL) closed down more than -7%, and ARM Holdings Plc (ARM) closed down more than -6%. In addition, Advanced Micro Devices (AMD) and SanDisk (SNDK) closed down more than -5%, and Lam Research (LRCX), Seagate Technology Holdings Plc (STX), Microchip Technology (MCHP), Intel (INTC), and Western Digital (WDC) closed down more than -4%.
The Magnificent Seven technology stocks fell on Wednesday, weighing on the broader market. Nvidia (NVDA) and Meta Platforms (META) closed down more than -3%, and Tesla (TSLA) closed down more than -2%. Also, Alphabet (GOOGL), Amazon.com (AMZN), and Microsoft (MSFT) closed down more than -1%. Bucking the trend, Apple (AAPL) closed up +0.50%.
Cybersecurity stocks weakened on Wednesday, weighing on the overall market. Cloudflare (NET) and Okta (OKTA) closed down more than -6%, and Palo Alto Networks (PANW) closed down more than -5%. Also, Crowdstrike Holdings (CRWD) and SentinelOne (S) closed down more than -4%, and Fortinet (FTNT) and Zscaler (ZS) closed down more than -3%.
Cryptocurrency-exposed stocks fell on Wednesday after Bitcoin (^BTCUSD) fell more than -1%. Iren Ltd (IREN) closed down more than -12%, and MARA Holdings (MARA) and Riot Platforms (RIOT) closed down more than -9%. Also, Galaxy Digital Holdings (GLXY) and Robinhood Markets (HOOD) closed down more than -8%, and Circle Internet Group (CRCL), BitMine Immersion Technologies (BMNR), and Strategy (MSTR) closed down more than -5%. On addition, Coinbase Global (COIN) and Bullish (BLSH) closed down more than -4%.
Health insurance stocks moved higher on Wednesday as a defensive play amid the broader market rout. UnitedHealth Group (UNH) closed up more than +4% to lead gainers in the S&P 500 and Dow Jones Industrials. Also, CVS Health Corp (CVS), Cardinal Health (CAH), and United Health Services (UHS) closed up more than +3%, and HCA Healthcare (HCA) and the Cigna Group (CI) closed up more than +2%. In addition, Centene (CNC) and Humana (HUM) closed up more than +1%.
Defensive pharmaceutical stocks rallied on Wednesday amid the broader market slump. Amgen (AMGN), Eli Lilly (LLY), Gilead Sciences (GILD), Merck & Co (MRK), Pfizer (PFE), and Regeneron Pharmaceuticals (REGN) closed up more than +3%, and Vertex Pharmaceuticals (VRTX) closed up more than +2%.
Dell Technologies (DELL) closed down more than -11% to lead losers in the S&P 500 , Hewlett Packard Enterprise (HPE) closed down more than -8%, and NetApp (NTAP) closed down more than -6% after Barclays downgraded the stocks to equal weight from overweight.
Bank of America (BAC) closed down more than -4% after reporting Q3 equities trading revenue ex-DVA of $2.51 billion, weaker than the consensus of $2.63 billion.
State Street (STT) closed down more than -3% after reporting Q3 revenue of $4.00 billion, weaker than the consensus of $4.04 billion.
Progressive (PGR) closed down more than -3% after reporting Q3 net premiums written of $22.30 billion, below the consensus of $22.50 billion.
Liquidia (LQDA) closed up more than +27% after reaching a global settlement resolving all pending litigation with United Therapeutics.
Earnings Reports (10/15/2026)
Alcoa Corp (AA), Bank of New York Mellon Corp/The (BNY), Charles Schwab Corp/The (SCHW), First Horizon Corp (FHN), Interactive Brokers Group Inc (IBKR), JB Hunt Transport Services Inc (JBHT), Marsh & McLennan Cos Inc (MRSH), PNC Financial Services Group Inc (PNC), Prologis Inc (PLD), US Bancorp (USB).
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.