Stocks cut gains as dollar and yields rise after US CPI cements December rate hike bets
SPY•US stocks were set for a lower open and European shares pared gains after October consumer prices rose 0.4%, above the 0.3% forecast. Traders fully priced two 25-basis-point rate hikes by March, with the first expected in December.
1. Inflation shifts rate bets
US stocks were set for a lower open on Tuesday, while the STOXX 600 pared gains after October consumer prices rose 0.4%, following a 0.6% increase in September. Economists had forecast a 0.3% rise. Traders were fully pricing two 25-basis-point rate hikes by March, with the first expected in December.
2. Yields and dollar rise
The two-year Treasury yield rose 14 basis points to 4.69%, and the dollar strengthened against the yen and euro. Fed Governor Christopher Waller said the central bank should raise short-term borrowing costs next month and consider a half-point increase if inflation worsened.
3. Stocks and oil in focus
Brent crude fell more than 3.2%, below $90 a barrel, as investors pinned hopes on possible US-Iran peace talks. Nvidia shares fell 1.4% in premarket trading after a separate media report said CEO Jensen Huang’s affair facilitated at least $7.5 billion in chip shipments; the company is due to report earnings next week.
