U.S. stocks fell on Tuesday after the latest cpi report today showed inflation running hotter than investors wanted, with core price growth above expectations and annual headline consumer inflation at 3.8%.
The Nasdaq Composite tumbled roughly 1.2%, the S&P 500 shed 0.7% after a record close, and the Dow Jones Industrial Average retreated 0.6%. The move was led by a sharp selloff in technology and chip shares, as the PHLX Semiconductor index dropped about 5%. Qualcomm fell 12% for its worst day since 2020, and Intel declined 9%.
The inflation reading landed just days after Friday’s stronger-than-expected April jobs report, giving traders another reason to question how soon the Federal Reserve can ease policy. Stephen Brown, an economist, said inflation was “still a bit too strong for comfort,” and warned that higher gasoline and food prices together will further boost households’ inflation expectations.
Energy prices added to the pressure. West Texas Intermediate crude rose 3.3% to over $101 a barrel, while Brent crude futures climbed 3.3% to above $107 a barrel as investors watched tensions around Iran and the Strait of Hormuz blockade that has pressured global fuel and energy prices.
The market reaction left little doubt about where traders think policy is headed. According to CME FedWatch, futures were pricing in a nearly 98% chance that the Fed will hold rates steady at its next meeting in June and through most of 2026, even as markets still saw nearly a 30% chance of a rate hike by December. With the semiconductor rally already extended — the index had climbed 60% since the start of the year — Tuesday’s inflation surprise gave investors a reason to step back and reassess how much good news was already priced in.
