The Nasdaq fell 1.88% on Wednesday to 26,692.87, its biggest daily drop since July 23. The S&P 500 lost 1.11% to 7,718.94, its worst day since July 29. The Dow barely registered it, down 0.09% at 51,621.48.
The trigger was a hot inflation report, and the damage fell hardest on artificial intelligence stocks that are sensitive to borrowing costs.
Rate hike bets climb
US consumer prices accelerated in September as petrol costs surged and price pressures spread beyond energy, according to the Labor Department’s Bureau of Labor Statistics. Traders responded by pricing in a 37% chance that the Federal Reserve raises rates in October, up from 22% on Tuesday, CME’s FedWatch tool showed.
“Investors are not happy with the report because that puts pressure on the Fed to raise rates to combat inflation,” said Adam Sarhan, chief executive of 50 Park Investments in New York. “Inflation remains public enemy number one for the market and for the Fed.”
Earlier in the day, before the data came out, Fed vice-chair for Supervision Michelle Bowman had said the central bank had time to watch how markets and the economy develop after its September rate hike before deciding on more.
Tech and AI lead the slide
Eight of the 11 S&P 500 sectors finished lower. Information technology fell 2.6% and communication services 1.78%. The Philadelphia Semiconductor Index dropped 4.3%, its sixth straight losing session and longest such run since May 2025.
Oracle shed 8.8%. CoreWeave tumbled 15% and Nebius 10%. Dell sank 11.4% and Hewlett Packard Enterprise 8.2% after Barclays cut both AI server makers to “equal-weight” from “overweight.”
Banks and breadth
The S&P 500 Banks index slipped 0.7% to its lowest close since June. Bank of America fell 4.8% after a third-quarter profit decline, in which it set aside $1.2 billion for regulatory fines over failures to detect potential money laundering. Morgan Stanley lost almost 3% even though its quarterly profit rose.
One bright spot: Bending Spoons jumped 41% after Berkshire Hathaway put another $330 million into the owner of Vimeo and AOL.
Volume ran heavy, with 18.0 billion shares changing hands against a 20-session average of 17.6 billion. The S&P 500, which hit a record last week, is still up almost 13% for 2026, but AI stocks drove most of that. The median stock in the index has gained 4%, and more than 200 members are in the red for the year.
