JJ Kinahan is Senior Vice President, Head of Retail Expansion and Alternative Investment Products at Cboe Global Markets, Inc. (Cboe).
Key Takeaways:
- Hot CPI report upends markets
- Fears of rising interest rates heightened
- Tech stocks pull back again
The hotter-than-expected inflation report pulled the markets to the downside and accelerated Treasury yields as investors feared higher interest rates might come sooner than expected only a day ago. The three major indices wallowed in negative territory throughout the session with technology stocks taking center stage.
The slide started early and reversed pre-market gains after the headline Consumer Price Index (CPI) for September report rose 0.6%, the highest in five months, driven by a 9.1% rise in prices at the pump. Core CPI, which pulls out erratic food and energy prices, climbed 0.3%. On a year-over-year basis, that accounted for a 3.7% upswing, higher than the 3.6% Wall Street was anticipating and above August’s 3.4% showing.
Rising interest rates and fears of rates staying higher for a longer period of time increases corporate borrowing costs and are typically detrimental to stock valuations. What’s more, if investors think they can find better returns elsewhere, say in bond yields, they’ll move their money.
Treasury bond prices did fall and yields, which move in opposite directions, climbed. The 10-year yield touched a high of 5.32% when the CPI hit the tape, but as the day wore on, it pulled back to finish lower by 5.19%. Mortgage rates got smacked, with the 30-year fixed hitting 7.56% this morning, up 10 basis points from Tuesday, but settling at 7.47%.
The CME FedWatch tool reaction was also rapid, advancing 17.2% to a 39.3% probability that the Federal Reserve will raise the interest rate range by 25 basis points later this month. Though it cooled down to a 32.7% probability at the close, the unexpected CPI uptick could challenge the Fed’s signals that it will take a slow-and-steady route to higher rates aimed at containing inflation toward its 2% target rates. The FedWatch tool is showing a 92% likelihood that rates will rise from 25 basis points to 50 basis points.
We’ll keep tabs on whether Fed Chair Kevin Warsh addresses rising interest rates when he speaks at the International Monetary Fund’s meetings in Bangkok late tonight. This is the last word we’ll have from Fed members because their quiet period starts before their two-day meetings begin October 27. Given his close-to-the-vest approach to his interest-rate thoughts, we’re not too hopeful.
Given the market unrest, it’s not surprising the Cboe Volatility Index® (VIX® Index) advanced by 11.8%, rising above 17 in early trading and finishing just below it. While the move is notable -- the VIX® Index runs opposite the S&P 500 Index – it is still well below 20, a level where folks start to worry.
When the bell rang, the Dow Jones Industrial Average slipped moderately, while the S&P 500 retracked by 1.11% and the Nasdaq Composite gave back 1.88%. WTI Crude Oil prices hit $96.06 in intraday trading and finished higher by 1.93% to $93.97.
Technology stocks were knocked again. For weeks, investors have been rethinking the heavy debt poured into artificial intelligence (AI) development amid the questionable ability to generate returns that justify their stock prices. Nasdaq is nearly 4% off the record peak it hit just last week.
Concerns about too much spending and too much debt pushed Coreweave shares down nearly 15.5% as yields on its debt rose into mid-double digits, representing a prime example of how interest rate fluctuations can impact corporate debt and stock price.
Semiconductor shares fell for the seventh straight day, thumped by fears of rising interest rates as well as increased competition from China. Nvidia shares lost 3.5% while Broadcom fell 3.1%. Meta gave back 3.3% and Tesla was off 2.2%. Amazon, Alphabet and Microsoft were all off 1.7% to 1.8%, all in line with the broader market pullback.
Apple was an outlier as its shares paddled in positive waters all day and finally was able to close with a market capitalization above $5 trillion, at $5.01 trillion, a 0.50% gain. We noted some bullish activity in the 350 calls and the 340 puts expiring Friday with almost three times the normal number of trades.
Bank of America and Morgan Stanley earnings were mixed and shares ended lower. BofA missed profit and revenues projections, even after excluding the $1.2 billion fine it received for failing to meet anti-money laundering and sanctions obligations. Morgan Stanley outpaced Wall Street’s expectations, but got caught up in the broader market pulldown.
There’s some unusual Amazon options activity today with buying at the 260 and 270 levels, expiring Friday. It’s interesting, too, because the buys are 1.5 times the normal amount of calls on a day when tech stocks suffered.
The Producer Price Index (PPI) and retail sales reports are coming out before the market tomorrow, giving us another measure of the pressure that might be feeding inflation.
Happy Trading!
© 2026 Cboe Exchange, Inc. All rights reserved.
The information provided is for general education and information purposes only. No statement provided should be construed as a recommendation to buy or sell a security, future, financial instrument, investment fund, or other investment product (collectively, a “financial product”), or to provide investment advice.
