Hotter-than-expected inflation data sent the Nasdaq to a lower close on Wednesday, with Oracle, CoreWeave, and other AI-linked technology stocks losing ground as traders weighed the prospect of the Federal Reserve holding borrowing costs elevated for longer — a scenario that historically compresses the lofty valuations those shares tend to carry. Anticipation that the Federal Reserve would lift interest rates to rein in inflation put pressure on a cluster of stocks that had driven the market's advance through 2026.

Shares in Oracle, CoreWeave, and Nebius each posted losses on the day. Stock prices for both Dell and Hewlett Packard Enterprise moved lower after Barclays downgraded the two AI server makers from "overweight" to "equal-weight." Six consecutive down sessions pushed the Philadelphia SE Semiconductor index to its longest run of losses since May 2025.

Inflation readings for September pointed to a pickup in consumer prices, driven partly by a jump in gasoline costs and a spread of upward pressure into categories beyond energy, according to Bureau of Labor Statistics data released by the Labor Department.

Derivative markets were assigning roughly a 37% probability to a Fed rate increase this month — nearly double the 22% odds recorded two days prior, per CME's FedWatch tool. Adam Sarhan, chief executive of 50 Park Investments in New York, noted that the latest data had unsettled investors by strengthening the case for tighter monetary policy, with price pressures continuing to weigh on both market sentiment and central bank deliberations.

Preliminary figures showed the S&P 500 retreating 83.96 points, or 1.08%, to close at 7,721.49, and the Nasdaq Composite sliding 502.90 points, or 1.85%, to 26,701.48. Trading in the blue-chip index closed with a 45.23-point retreat, leaving the Dow at 51,624.87 after a 0.09% pullback.

Driven largely by gains in AI-linked equities, the S&P 500 has held onto a year-to-date advance of more than 12% through 2026, a stretch that included a record-setting close in the prior week. The S&P 500's year-to-date gain of around 4% at the index level obscures a notable split in performance, with over 200 constituent stocks still carrying negative returns for the period.

Shares in Bank of America moved lower. Quarterly earnings at the bank contracted after management allocated $1.2 billion toward anticipated regulatory penalties tied to lapses in anti-money-laundering oversight. Shares in Morgan Stanley slid even as the bank posted a quarterly profit increase. Trading in the S&P 500 Banks index pulled it back to a point not seen in more than four months.

Ahead of the inflation figures, Fed Vice Chair for Supervision Michelle Bowman indicated that policymakers had room to observe how financial markets and the broader economy responded to the rate increase taken in September before committing to any next steps.

Shares in Bending Spoons gained ground after a fresh $330 million commitment from Berkshire Hathaway flowed into the company, which holds Vimeo and AOL among its assets.