Hot September CPI at 3.7% Triggers Global Market Selloff and Revives Fed Rate Hike Bets

A hotter-than-expected September consumer price index sent stocks, crypto and Asian markets into a sharp selloff on October 14-15, while San Francisco Fed President Mary Daly signaled that further rate hikes are more likely than not even as she urged patience on timing. Headline inflation rose 3.7% year over year in September, up from 3.4% in August and ahead of the 3.6% consensus forecast, with a monthly gain of 0.6%. Surging gasoline costs accounted for more than half of the monthly jump, while core CPI, which strips out food and energy, came in at 2.6% and remained stubborn in line with Fed expectations. A separate Fed Beige Book survey flagged intensifying price pressures across US regions.

Daly said the Fed is "more likely than not" to need additional rate hikes but stressed there is no urgency, explicitly signaling that the October 27-28 meeting is not the moment to act. She described it as rash to respond before policymakers have had time to deliberate carefully, noting that a stable labor market allows the central bank to focus squarely on price stability. Markets interpreted her comments as slightly reassuring after an initial sharp reaction to the CPI print. CME FedWatch data showed the probability of a 25-basis-point hike at the October 28 meeting rising to 24.9% from 17.7% a week earlier.

Wall Street sold off broadly. The S&P 500 closed down 86.51 points, or 1.11%, at 7,718.94, its worst session since late July, wiping out roughly 800 billion dollars in market value. The Nasdaq Composite dropped 511.51 points, or 1.88%, to 26,692.87, its steepest single-day loss in three months, dragged down by AI infrastructure stocks facing both higher rate fears and fresh concerns about debt-fueled expansion. The Dow Jones Industrial Average showed relative resilience, falling just 48.62 points, or 0.09%, to 51,621.48. The Russell 2000 small-cap index tumbled 53.84 points, or 1.89%, entering correction territory. Oracle fell 8.8%, CoreWeave plunged 15.91% as the yield on its 9.625% bond due 2032 climbed toward 14.8%, and Nebius dropped 10%. Bank of America shares slid 4.8% after third-quarter profits missed consensus estimates. The 10-year Treasury yield spiked to 5.329% immediately after the CPI release before reversing to around 5.189% as investors sought haven assets in bonds.

The selloff spread aggressively through Asia overnight. Japan's Nikkei fell close to 5%, led by SoftBank down 7.9%, Advantest down 7.3%, and Tokyo Electron down 5.8%. South Korea's KOSPI tumbled 8%, triggering a circuit-breaker halt at midday, with SK Hynix plunging more than 10% and Samsung Electronics down 7.1%. Chinese equities fell sharply in early trading. The dollar index briefly hit an 18-month high before retreating as Treasury yields reversed and reports of Chinese buying of US government bonds smashed yields further during the Asian session.

Crypto markets were hit hard. Bitcoin fell as much as 2.3% to around 81,500 dollars before dropping further below 81,000 dollars during Asian hours. Total crypto liquidations over 24 hours reached approximately 1.1 billion dollars, with long positions accounting for roughly 91% of that figure. Bitcoin miners listed on US exchanges suffered outsized losses, with IREN falling 12.1% and American Bitcoin dropping 11.43%.

On the global data front, the UK economy outperformed expectations, growing 0.1% month over month in August and 2.1% year over year, beating forecasts of 1.7%. Industrial production rose 0.8% on the month and manufacturing output climbed 1.2%, both well above estimates. Eurozone industrial production disappointed, falling 0.5% month over month in August versus a flat consensus, and declining 1.1% year over year against a forecast of negative 0.1%. France's September CPI held at 3.1% year over year, a tick above the 3.0% expected.