US stocks closed lower on Wednesday as hotter-than-expected inflation data increased expectations of further Federal Reserve interest rate hikes, weighing on technology shares and other rate-sensitive investments.
The S&P 500 fell 1.08% to 7,721.49, while the Nasdaq Composite dropped 1.85% to 26,701.48.
The Dow Jones Industrial Average declined 0.09%, or 45.23 points, to 51,624.87, with gains in healthcare stocks helping limit its losses.
Investors also assessed quarterly results from major US banks, while concerns about rising borrowing costs and debt-financed artificial intelligence infrastructure spending added pressure to the technology sector.
Hotter US CPI data raises Fed rate hike expectations
The US consumer price index rose 0.6% month-on-month in September, while annual inflation accelerated to 3.7%, above economists’ expectations of 3.6%.
Core CPI, which excludes food and energy, increased 0.3% during the month and 2.6% over the year. Both readings exceeded forecasts of 0.2% and 2.5%, respectively.
Rising gasoline prices accounted for more than half of the monthly increase in headline inflation, while price pressures also broadened beyond energy.
The data increased concerns that the Federal Reserve may need to maintain tighter monetary policy for longer or raise interest rates again.
According to CME’s FedWatch tool, traders priced in a 32.7% probability of an October rate hike, up from 22% on Tuesday.
The prospect of higher borrowing costs weighed on equities, particularly companies whose valuations depend on future growth and continued access to financing.
Despite Wednesday’s decline, the S&P 500 remained more than 12% higher in 2026 after reaching a record high the previous week.
However, the median stock in the index had gained just 4% for the year, while more than 200 components were in negative territory.
AI stocks and chipmakers extend their losses
Technology shares led the market decline as investors reassessed the outlook for artificial intelligence investments amid rising interest rate expectations and concerns about debt-funded infrastructure expansion.
Oracle shares fell around 9%, while CoreWeave plunged more than 16%. Nebius also declined as investors reduced exposure to AI infrastructure companies sensitive to higher borrowing costs.
Chipmakers extended their recent losses. Advanced Micro Devices fell 5%, while Intel and SanDisk each declined 4%. Micron Technology dropped 3%.
The Philadelphia Semiconductor Index fell for a sixth consecutive session, marking its longest losing streak since May 2025.
Dell and Hewlett Packard Enterprise also declined after Barclays downgraded both AI server manufacturers to Equal Weight from Overweight.
The sell-off highlighted growing investor scrutiny of the financing required to support AI infrastructure expansion, particularly among companies outside the largest technology firms.
Bank stocks fall as BofA and Morgan Stanley decline
Financial stocks also weighed on the market following quarterly earnings announcements from major US lenders.
Bank of America shares dropped 5% after its third-quarter revenue missed expectations. The bank’s profit was also hurt by provisions for more than $1.2 billion in regulatory penalties linked to failures in detecting potentially suspicious transactions.
Morgan Stanley shares fell nearly 4% despite reporting quarterly results that exceeded expectations, supported by stronger equity trading performance.
The S&P 500 Banks Index declined to its lowest level in more than four months, reflecting pressure across the sector.
Elsewhere, Bending Spoons shares rallied after Berkshire Hathaway invested another $330 million in the Italian technology company, adding to its previous $600 million investment.
The move brought Berkshire’s total investment to $930 million and its stake to approximately 4%.