Closing Bell: Stocks Sharply Lower on AI Debt Fears and Hot Inflation Data

Stocks sold off on Wednesday after September consumer inflation data came in hotter than expected.

The Nasdaq-100 slipped 2% and the small-cap Russell 2000 fell 1.93% into correction territory. The S&P 500 dropped 1.11%, while the Dow fell less than a tenth of a percent.

The U.S. Bureau of Labor Statistics Consumer Price Index (CPI) report Wednesday showed that inflation accelerated more than expected to a 3.7% annual rate in September, up from 3.4% in August. On a monthly basis, the headline CPI increased by 0.6%, marking the largest monthly increase in five months. The surge was heavily driven by a 5.2% rise in energy prices, resulting from ongoing geopolitical tensions, including a 9.1% surge in gasoline prices.

That sent the probability of an October Federal Reserve rate hike from roughly 20% Wednesday morning to about 33% by the end of the day, according to the CME FedWatch tool.

Information Technology was the weakest sector in the S&P 500, falling 2.6%, and communications stocks in the index were off by 1.7%. Conversely, health care, up 2.4%, and consumer staple, up nearly 2.4%, offset some damage.

Here are items of note from Wednesday’s market action:

Shares of CoreWeave (CRWV) plunged 15.5% on Wednesday as questions escalated regarding its debt level and the health of AI investing. Some of CoreWeave’s bonds traded at distressed levels Wednesday, to yield more than 15%, according to data reported by Dow Jones Newswires. CoreWeave's CEO Mike Intrator said the market is acting "irrationally." CoreWeave stock is down nearly 25% in October. See NVDA, PLTR, MSFT, AAPL, CRWD: Dan Ives' Top 5 Stock Picks into 2027

Dell Technologies (DELL), whose shares are up 303% this year, had its worst day in over a year, with a decline of more than 11%. Barclays (BCS) downgraded Dell, Hewlett Packard Enterprise (HPE) and NetApp (NTAP) to Equal Weight from Overweight. Barclays cut its Dell price target to $574 from $603, noting caution on tech hardware stocks due to high valuations. HPE shares were down more than 8% and NetApp shares dipped 7%.

Bank of America (BAC) dropped nearly 5% after its results missed estimates on the top and bottom lines. The earnings report came a day after the Treasury Department announced a more than $1.2 billion fine for BAC violations of anti-money laundering and sanctions laws.

Morgan Stanley’s (MS) latest quarterly results topped expectations, though the stock traded 2.7% lower on Wednesday. See Key Takeaways from Big Bank Earnings & AI's Impact on Financial Sector

For more on the outlook for industrial sector earnings season, see Will U.S. Industrial Sector Earnings Show Another Quarter of Growth?

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