The S&P 500 fell 0.9% during Tuesday afternoon trading, while the Dow Jones Industrial Average dropped 319 points, or 0.6%, as of 1:29 p.m. Eastern time. The technology-heavy Nasdaq Composite declined 1.4%.
The losses followed Monday’s strong rebound, when investors returned to technology shares after a period of sharp declines.
By Tuesday’s close, the S&P 500 was down approximately 0.7%, the Dow lost 0.6%, and the Nasdaq declined 0.9%, according to Reuters.
The market reaction demonstrated how quickly investor sentiment can change when economic data suggests that borrowing costs could remain elevated.
US Inflation Rises More Than Expected in October
The latest inflation report showed that American households continued to face higher prices for essential goods and services.
According to the US Bureau of Labor Statistics, consumer prices increased 0.4% in October, compared with a 0.6% increase in September.
Economists had expected October prices to increase by only 0.3%.
Core inflation, which excludes food and energy prices, advanced 0.3%, also exceeding economists’ forecasts.
| Inflation measure | October result | Economists’ forecast |
|---|---|---|
| Consumer Price Index (CPI) | 0.4% | 0.3% |
| Core CPI | 0.3% | 0.2% |
| September CPI | 0.6% | — |
Higher prices for groceries, electricity, transportation and other household expenses contributed to the persistent inflationary pressure.
Although the monthly headline increase slowed from September, the reading remained above expectations and reinforced concerns that inflation has not been brought under control.
Federal Reserve Could Raise Interest Rates by 0.50 Percentage Points
Federal Reserve Governor Christopher Waller warned Tuesday that the central bank might need to consider a larger-than-usual interest rate increase in December.
Speaking in London before the inflation report was released, Waller said policymakers should consider a half-percentage-point increase if underlying inflation reached approximately 0.3%.
The report subsequently showed core inflation rising exactly 0.3%.
A typical Federal Reserve rate adjustment is 0.25 percentage points, making a 0.50-point increase a more aggressive response.
Waller suggested that failing to respond adequately to persistent inflation could undermine the central bank’s credibility.
However, the Federal Reserve has not announced its December decision, and the outcome will depend on economic developments and policymakers’ assessment of inflation and employment.
Treasury Yields Jump Above 5%
The bond market reacted sharply to the inflation report.
The yield on the benchmark 10-year US Treasury note climbed to approximately 5.01%, compared with 4.88% late Monday.
The increase was significant because Treasury yields influence borrowing costs across the American economy.
Mortgage rates, corporate borrowing costs and other forms of credit often move in response to changes in Treasury yields.
Higher bond yields can also reduce the appeal of stocks, particularly those trading at elevated valuations.
The 10-year Treasury yield had previously exceeded 5.30% in early October before declining as investors reassessed inflation and interest-rate expectations.
Tuesday’s renewed increase indicated that concerns about persistent inflation had returned to the forefront of financial markets.
Nvidia Stock Drops 6.3% as AI Shares Come Under Pressure
Technology stocks were among the biggest casualties of Tuesday’s market decline.
Nvidia, a major supplier of advanced chips used in artificial intelligence systems, fell 6.3% during afternoon trading and was one of the largest contributors to the S&P 500’s losses.
The company has faced additional scrutiny following reports concerning CEO Jensen Huang and a relationship with a woman whom US intelligence officials reportedly suspected of gathering information for China.
Nvidia’s board has reportedly opened an investigation into the matter. The allegations and their potential implications remain subject to investigation.
The controversy has added company-specific uncertainty to broader concerns about AI-sector valuations.
Investors are already questioning whether enormous spending on artificial intelligence infrastructure will generate sufficient financial returns.
The recent decline follows volatility across the technology sector as investors assess the possible effects of tighter oversight of AI data-center development.
Other AI Stocks Fall as Investors Reassess Technology Spending
Nvidia was not the only AI-related company under pressure.
GE Vernova, which supplies energy infrastructure used to support large data centers, dropped approximately 7%.
Micron Technology, a major manufacturer of memory chips, fell around 3.6%.
CoreWeave, which provides cloud computing services powered by advanced AI chips, declined approximately 2.6%.
Advanced Micro Devices performed comparatively better, trading near unchanged levels during the afternoon.
The weakness in AI-related shares reflects concerns about future capital spending, financing costs and whether the industry’s rapid expansion can continue at its recent pace.
Higher interest rates could make major infrastructure projects more expensive, particularly for businesses relying heavily on borrowed capital.
Anthropic Targets $1.3 Trillion Valuation in Planned IPO
Despite the turbulence affecting artificial intelligence stocks, Anthropic moved ahead with plans for a potentially historic initial public offering.
The company behind the Claude AI chatbot disclosed plans to sell shares at a price that would value the business at approximately $1.3 trillion.
Such a valuation would place Anthropic among the world’s most valuable publicly traded companies.
The planned offering could become a significant test of investor confidence in the artificial intelligence industry.
Investors have increasingly questioned the enormous spending required to develop advanced AI models and operate the computing infrastructure supporting them.
Anthropic’s offering could provide an indication of whether demand for AI companies remains strong despite recent market volatility.
Homebuilder Stocks Fall as Mortgage Rate Concerns Grow
Higher Treasury yields also weighed heavily on the US housing sector.
Homebuilder Lennar dropped approximately 4.4%, while D.R. Horton fell 3.6% and PulteGroup declined 3.5%.
Builders FirstSource, which supplies building materials and other products to residential construction companies, lost around 3.9%.
Higher mortgage rates can reduce housing affordability, making it more difficult for potential buyers to qualify for home loans.
That can weaken demand for newly constructed homes and put pressure on companies involved in residential development.
Investors are closely watching whether another Federal Reserve interest rate increase could further slow housing activity.
Oil Prices Fall Despite Inflation Concerns
Oil prices declined Tuesday as investors monitored developments involving the conflict with Iran.
Brent crude fell approximately 0.8% to $91.81 a barrel during the afternoon.
The decline came after President Donald Trump suggested late Monday that major military operations connected with the conflict were effectively over.
Brent crude had traded above $112 a barrel earlier in November, reflecting concerns about possible disruptions to global energy supplies.
Oil prices subsequently declined as investors assessed the possibility of reduced geopolitical tensions.
However, the fall in crude prices did little to ease concerns about inflation across the broader US economy.
Asian and European Markets Perform Better
While Wall Street struggled, several major international stock markets advanced.
South Korea’s Kospi index jumped approximately 4.4%, supported by gains in technology companies Samsung Electronics and SK Hynix.
Both companies have benefited from demand for advanced semiconductor products used in artificial intelligence computing.
European stock markets also recorded gains in several countries, creating a contrast with the pressure facing US technology shares.
Investors across global financial markets remain focused on inflation, interest rates, geopolitical developments and the sustainability of AI investment.
What Investors Are Watching Next
Wall Street’s next major focus will be the Federal Reserve’s December 8–9 policy meeting.
Investors will monitor further economic data for signs that inflation is easing or remaining persistently elevated.
They will also examine upcoming corporate earnings reports, particularly from major technology companies involved in artificial intelligence.
The combination of rising Treasury yields, expensive technology valuations and uncertainty about future interest rates is likely to remain an important consideration for financial markets.
