NEW YORK: Hotter-than-expected inflation data sent the Nasdaq to a sharply lower close on Wednesday, with worries about more interest rate hikes from the Federal Reserve pummeling shares of Oracle, CoreWeave and other AI stocks sensitive to higher borrowing costs.
Increased bets that the Fed will need more rate hikes to tame inflation dealt a sharp blow to some of the market's biggest gainers of 2026. Oracle lost 8.8%, while AI-infrastructure firms CoreWeave and Nebius tumbled 15% and 10%, respectively.
Dell and Hewlett Packard Enterprise sank 11.4% and 8.2%, respectively, after Barclays downgraded the AI server makers to "equal-weight" from "overweight".
The Philadelphia SE Semiconductor Index dropped 4.3%, down for a sixth straight session, its longest losing streak since May 2025.
Apple rose 0.5%, with its market capitalisation closing above US$5 trillion for the first time.
US consumer prices accelerated in September as the cost of gasoline surged and price pressures broadened beyond energy, data from the labor department's Bureau of Labor Statistics showed.
Interest-rate traders are pricing in a 37% chance that Fed policymakers will raise rates this month, up from 22% on Tuesday, according to CME's FedWatch tool.
"Investors are not happy with the report because that puts pressure on the Fed to raise rates to combat inflation," said Adam Sarhan, chief executive of 50 Park Investments, in New York. "Inflation remains public enemy number one for the market and for the Fed."
The S&P 500 declined 1.11% to end the session at 7,718.94 points, its biggest one-day drop since July 29.
The Nasdaq declined 1.88% to 26,692.87 points, its biggest daily drop since July 23. The Dow Jones Industrial Average declined 0.09% to 51,621.48 points.
Eight of the 11 S&P 500 sector indexes declined, led lower by information technology, down 2.6%, followed by a 1.78% loss in communication services.
Volume on US exchanges was relatively heavy, with 18.0 billion shares traded, compared to an average of 17.6 billion shares over the previous 20 sessions.
After hitting a record high last week, the S&P 500 remains up almost 13% in 2026, with most of that gain fueled by AI-related stocks. The median S&P 500 stock has gained 4% in 2026, and over 200 of the index's components are in negative territory.
Bank of America fell 4.8%. The lender's profit fell in the third quarter as it set aside US$1.2 billion to cover regulatory fines for failures to detect potential money laundering. Morgan Stanley dropped almost 3%, despite a rise in quarterly profit.
The S&P 500 Banks index dipped 0.7% to its lowest close since June.
Before the inflation data was released, Fed vice-chair for supervision Michelle Bowman said the central bank had time to wait and see how markets and the economy evolve after its September rate rise before deciding further action.
Bending Spoons rallied 41% after Berkshire Hathaway invested another US$330 million in the owner of Vimeo and AOL, a big endorsement from the high-profile investor whose moves traders closely follow.
Declining stocks outnumbered rising ones within the S&P 500 by a 1.1-to-one ratio.
The S&P 500 posted 15 new highs and 11 new lows; the Nasdaq recorded 27 new highs and 521 new lows.