Wednesday's inflation reading — showing consumer prices climbing faster than analysts had anticipated — pushed the dollar higher and pulled Wall Street equities lower, with traders pricing in a rate increase from the Federal Reserve as early as this month.
September's core consumer price index came in at a 0.3% monthly gain, according to Labor Department figures, running a tenth of a percentage point above what economists had pencilled in. Measured over a full year, the core inflation reading — which sets aside food and energy costs — came in at 2.6%, nudging past the 2.5% analysts had pencilled in, while the broader headline figure landed at 3.7%, just ahead of the 3.6% that had been anticipated.
The dollar climbed 0.36% against a basket of currencies to its strongest point since April 2025, while two-year Treasury yields — those most attuned to shifting expectations around inflation and monetary policy — added 0.23 basis points on the session to reach 4.87%. Mark Hackett, chief market strategist at Nationwide, noted in a statement that the reading had come in above forecasts not only in energy but across other categories as well, pointing to indications that elevated tariffs and conflict-related supply disruptions were filtering through to a broader range of goods, and that investors were adjusting to the prospect of inflation remaining elevated for a prolonged period.
That shift was reflected in LSEG data showing money-market positioning moved the implied probability of a Federal Reserve rate increase this month to around 41%, up from roughly 20% before the data release, while the likelihood of a further rise in December became more firmly priced in.
Sterling retreated 0.53% against the dollar to trade at $1.3182, while the euro gave back 0.4% to settle at $1.1153. The yen traded at 158.16 units against the dollar.
Equities on Wall Street dipped across all three major indexes, with pressure stemming from technology and industrial shares, even as healthcare, consumer staples, and energy holdings posted gains. The Nasdaq Composite gave back 2.14%, the S&P 500 shed 1.33%, and the Dow Jones Industrial Average slipped 0.37%.
Quarterly earnings disclosures from two banks told contrasting stories: Bank of America posted a drop in third-quarter profit, while Morgan Stanley's results for the same period cleared analyst forecasts, driven by a buoyant performance in equity trading.
Trading on the day left Europe's STOXX 600 narrowly ahead by 0.43% after it surrendered part of an earlier advance, whereas the MSCI All-World index retreated 0.96%.
Investor sentiment had already grown unsteady by the time the consumer data arrived, with crude prices moving higher after two vessels were struck in the Strait of Hormuz and a respected broadcaster reported receiving word from Iranian authorities of plans to deploy fresh tactics against commercial shipping — a pairing of developments that fed into broader unease about the reliability of energy supply routes.
Brent crude futures closed at $106.06 a barrel on Thursday, a price that left the contract hovering within reach of its best level in roughly two weeks, after ticking up 0.35% on the day. Bullion prices retreated, with spot gold losing ground to settle at $4,094.88 per ounce — a drop of 1.49%.
