September CPI rises 3.7% year-on-year, fueling concerns over additional Fed rate hikes
Semiconductor index plunges 4.30% while healthcare and consumer staples gain
U.S. equity markets fell across the board on October 14 (local time) as a resurgence in inflationary pressure weighed on investor sentiment. Selling pressure was concentrated in semiconductor and artificial intelligence (AI) related stocks amid growing concerns that the Federal Reserve may pursue further interest rate hikes. Debt burdens on AI infrastructure firms also pressured the market, even as major healthcare and consumer staples stocks bucked the trend to trade higher.
The Dow Jones Industrial Average finished the session down 48.62 points, or 0.09%, at 51,621.48. The S&P 500 fell 86.51 points, or 1.11%, to 7,718.94, while the Nasdaq Composite plummeted 511.51 points, or 1.88%, to close at 26,692.87.
The downturn was more pronounced in the semiconductor sector. The Philadelphia Semiconductor Index closed at 11,684.38, down 524.41 points, or 4.30%. This marked the sixth consecutive day of losses, underscoring a prolonged period of weakness for the industry.
Investor sentiment was rattled by the release of the September Consumer Price Index (CPI) before the opening bell. According to the Bureau of Labor Statistics (BLS), the CPI rose 0.6% month-on-month and 3.7% year-on-year. The annual rate accelerated from August’s 3.4% and exceeded the 3.6% forecast by analysts polled by The Wall Street Journal (WSJ).
Gasoline prices, which surged 9.1% within a single month, accounted for more than half of the total monthly increase. Upward pressure was also evident in core categories excluding energy. The core CPI, which strips out volatile food and energy prices, rose 0.3% from the previous month and 2.6% from a year ago. Shelter costs climbed 0.4% month-on-month, while prices for used cars and airfares also edged higher.
Following the inflation report, markets began pricing in a higher probability of further tightening by the Fed. According to CME FedWatch data cited by Reuters, the probability of a rate hike in October rose to 37%, up from 22% just a day earlier.
These concerns placed a particular burden on AI-related companies that are currently engaged in massive capital expenditures. Persistently high interest rates threaten to increase borrowing costs necessary for building data centers and securing advanced equipment. This led the market to reassess the heavy investment costs against the backdrop of AI growth expectations.
In individual stocks, Nvidia fell 3.16%, and Broadcom dropped 3.10%. AMD slid 5.73%, Intel shed 4.56%, and Micron declined 4.10%. The weakness spread across the semiconductor supply chain, with equipment makers Lam Research and Applied Materials falling 4.71% and 3.79%, respectively.
Among AI infrastructure plays, CoreWeave plummeted approximately 15% as a sharp drop in its corporate bond prices intensified fears regarding its debt burden and future financing capabilities. The market’s focus has shifted to whether the company can continue to secure the capital necessary for infrastructure expansion. Chief Executive Mike Intrator sought to reassure staff in a memo, stating that the company's backlog is sufficient to support its debt obligations.
Oracle also slumped 8.83%, while Dell Technologies plunged more than 11%. Dell faced additional pressure after Barclays downgraded its rating from ‘Overweight’ to ‘Equal Weight,’ citing concerns over the pace of growth in enterprise AI spending.
Among mega-cap tech stocks, Microsoft fell 1.80% and Meta dropped 3.27%. Alphabet and Amazon shed 1.74% each, while Tesla declined 2.15%. Apple stood out with a 0.49% gain, showing relative stability compared to its peers.
In contrast to the tech rout, healthcare and consumer staples sectors performed well. UnitedHealth rose 4.73%, Eli Lilly gained 3.62%, and Johnson & Johnson added 2.13%. Retailers Walmart and Costco also climbed 3.46% and 2.87%, respectively.
The bond market saw a reversal in direction during the session. The 10-year U.S. Treasury yield spiked immediately after the CPI release but later retraced its gains. According to the WSJ, the 10-year yield stood at approximately 5.19% by 3:54 p.m. New York time, down from 5.216% the previous day.
Markets are now looking toward corporate earnings and upcoming economic data. TSMC is scheduled to hold its third-quarter earnings call at 3:00 p.m. KST today (15th), which will be a critical test for AI demand and revenue outlooks amid the semiconductor slump. Later tonight at 9:30 p.m. KST, the U.S. will release the September Producer Price Index (PPI) and preliminary retail sales figures.
