Selloff in US equities after CPI matches Waller's rate hike trigger

US futures showed little change before the CPI release and then fell sharply. Fed Governor Waller had prepared markets for a decline, suggesting that a core inflation reading of 0.3% would lead him to consider a half-percentage-point rate hike in December.

The CPI came in at 0.3%, with factors such as a 1.2% month-on-month drop in used car prices that could have pushed the figure higher. This rattled markets. Two-year Treasury yields climbed 18 basis points, and the 10-year yield topped 5%. Equities were consequently under pressure.

The sell-off was focused largely on technology stocks as AI worries persist. Nvidia lost another 6% as political attention turns to its chip sales to China following the honeypot revelation. The situation seems somewhat staged, but that is the way things operate in Washington. Some areas showed resilience, and the market had relatively even breadth. A rebound occurred when it was learned that Anthropic's $60 billion next-week IPO is fully booked.

The session saw real oscillations, but buyers came together late in the day to achieve a solid close, recovering from early losses.

Closing changes:

• S&P 500 -0.4%
• Nasdaq Comp -0.7%
• DJIA -0.3%
• Russell 2000 -0.8%
• TSX Comp -0.8%

US equity markets are open on Wednesday for Veterans Day, while Canadian markets and US bond markets are closed. The lack of US fixed-income trading should dampen volatility. However, after-hours earnings from neocloud CoreWeave are awaited and will be a significant driver.