Odds of an October 28 rate hike more than doubled yesterday, crossing 50% after September CPI topped the consensus.
Before the report, futures priced the October meeting near 20%. The jump past even odds sent the S&P 500 to its worst session since July, and pushed gold and silver sharply lower.
Headline CPI rose 3.7% year over year, above the 3.6% Dow Jones consensus and up from 3.4% in August. Core prices gained 2.6% against a 2.5% estimate, with gasoline surging 9.1% in the month.
The core overshoot carried more weight for rate expectations than the energy spike in the headline. Year-end hike odds now top 96%, and a PPI beat this morning would sharpen the October case.
The S&P 500 fell 1.11% to 7,718.94, its largest percentage decline since July 29. The Nasdaq dropped 1.88% as AMD fell 5.7%, Nvidia lost 3.2% and CoreWeave sank 15.5%.
Health care gained 2.44% and consumer staples added 2.38%, a defensive rotation tied to the rate repricing that hit growth hardest. TSMC reports before the open, testing AI chip demand after technology fell 2.62% in one session.
The 10-year Treasury yield spiked to 5.323% after the CPI release, and closed at 5.19%, down 3 basis points. The 30-year fell 5 basis points to 5.517% as the equity selloff pushed investors back into bonds.
October hike odds eased from about 50% to roughly 33% by the close, tracking the yield decline. Retail sales at 8:30 a.m. ET will test whether consumer demand is strong enough to push yields back toward last week's 24-year highs.
December gold settled at $4,107.90, down $69.40 on the session, as higher yields and a firmer dollar pressured the metal. Silver dropped about 6% to a 10-week low.
WTI crude settled at $95.09, up 1%, bucking the broader selloff on persistent Middle East supply concerns. Crude near $96 feeds into the energy inflation that pushed September CPI past the consensus, a headwind the October 28 meeting confronts.
September PPI arrives at 8:30 a.m. ET, consensus 0.5% monthly versus 0.4% in August. A beat would sharpen the October hike case.
Retail sales land at 8:30 a.m. ET, consensus 0.3% versus August's 1.2%. Strong spending paired with steady claims would leave the Fed little room to hold.
TSMC's earnings call begins at 2:00 a.m. ET, with PNC and Schwab also before the open. Fed Chair Warsh and IMF chief Georgieva speak at 11:30 p.m. ET.
