Hot CPI plus AI jitters make it the worst day since July

Wall Street had its worst day since July. The trigger was September CPI: consumer prices rose 3.7% from a year earlier, the fastest pace in five months, and core inflation, which strips out volatile food and energy, came in at 0.3% against a 0.2% forecast. In other words, the price pressure that began at the gas pump is spreading to other things.

Energy is the root cause. Gasoline jumped more than 9% in a month and now costs about a third more than a year ago, while wholesale diesel has more than doubled since January because of the wars in Iran and Ukraine. A temporary easing of sanctions on Russian diesel isn't expected to close the gap. After the report, traders priced roughly even odds that the Fed hikes again at its meeting in two weeks, and bond yields shot higher.

Then came the AI jitters. CoreWeave shares plunged as its borrowing costs spiked, and bond investors began to question the long-term outlook for some hyperscalers. Chip and AI stocks lost between 5% and 12% in five days, small caps slid 10% from their highs, and all six of the biggest banks fell even after solid earnings.

There was a counter-signal, though. ASML raised its sales outlook, warning it may not be able to meet AI demand in 2027 and 2028, and its shares rose. Selloffs tend to hit everything at once, but there's no evidence yet that demand itself has cracked.