Stocks Had a Rough Day After Inflation Report

Article By Newser

AI stocks had some of the steepest losses in market’s worst day since July

US stocks dropped to their worst day since July on Wednesday after the release of the latest government data on inflation.

• The S&P 500 fell 86.51 points, or 1.1%, to 7,718.94 for its fifth loss in the six days since setting its all-time high.
• The Dow Jones Industrial Average fell 48.62 points, or 0.1%, to 51,621.48.
• The Nasdaq composite fell 511.51 points, or 1.9%, to 26,692.87.

A report showing inflation accelerated last month raised expectations on Wall Street that the Federal Reserve will raise interest rates. More expensive borrowing could slow the buildout of AI data centers, and AI stocks were the heaviest weights on the market, the AP reports.

Stocks felt pressure from rising yields in the bond market, where worries grew after a report said US consumers had to pay prices for fuel, food, and other costs of living last month that were 3.7% higher overall than a year earlier.

That means inflation accelerated from its 3.4% rate in August and was worse than the 3.6% that economists expected. Traders now see a nearly 35% chance the Fed will raise the federal funds rate at its next meeting in two weeks, up from the 22% probability seen just a day earlier, according to data from CME Group.

Much of Wall Street’s pain on Wednesday was due to drops for companies riding the AI frenzy to huge profit growth and stellar stock gains. More expensive borrowing costs caused by higher interest rates could make it more difficult for companies to raise money to build data centers and fill them with AI chips. Drops of 3.2% for Nvidia, 3.1% for Broadcom, and 5.7% for Advanced Micro Devices were among the day’s heaviest weights on the S&P 500.

CoreWeave, which offers AI computing power to customers over the cloud, tumbled 15.5% toward its worst day since February. GE Vernova, which is hoping to electrify power-hungry data centers, dropped 6.2%. Oracle sank 8.8%.

Bank of America dropped 4.8% after reporting weaker profit and revenue for the summer than analysts expected. The profit would have failed to meet expectations even if the US Treasury Department had not announced $1.2 billion in fines late Tuesday for alleged violations of anti-money laundering and sanctions laws by the bank.

State Street sank 4.1% after reporting weaker revenue for the latest quarter than analysts expected, even though its profit was slightly above their forecasts.

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