Gasoline did most of the damage. September consumer prices rose 0.6% on the month and 3.7% on the year, and energy explains nearly all of the gap between headline and core inflation. Stocks sold off on Wednesday. The S&P 500 fell 1.10% to 7,719 and the Nasdaq Composite lost 1.88% to 26,692. The Dow slipped only 0.09% to 51,621.

The print

Headline CPI matched the 0.6% forecast and followed 0.4% in August. The annual rate reached 3.7%, a tenth above the 3.6% forecast and up from 3.4%. Core CPI, which strips out food and energy, rose 0.3% against a 0.2% forecast, the same pace as August. Its annual rate climbed to 2.6% from 2.4%.

Energy jumped 5.2% on the month and is up 20.4% on the year. Gasoline gained 9.1% in September alone and sits 34.2% above a year ago. Food was flat. Shelter added 0.4%.

Rates

The core miss matters most for the Federal Reserve. An energy shock can fade. A 0.3% core reading with shelter at 0.4% suggests price pressure is reaching beyond the pump. That keeps a rate increase on the table for the 27 and 28 October meeting.

Long yields barely reacted. The 10-year Treasury yield slipped two basis points to 5.19% from 5.21% on the Treasury’s par curve. The front end moved the other way, with the 2-year rising roughly three basis points. A flatter curve means traders are pricing tighter policy now and weaker growth later.

Technology

Technology carried the loss. The sector fell about 3%, led by AI infrastructure and chip names. Higher rates hit these stocks twice. They raise the cost of financing data-centre buildouts, and they cut the present value of earnings that sit years away. The Nasdaq fell nearly twice as far as the S&P 500.

Housing and small caps

Homebuilders closed at an 18-month low. Mortgage rates follow long-dated yields, and a 10-year above 5.2% for a week leaves buyers little relief. The Russell 2000 dropped 1.93% to 2,729, as smaller companies carry more floating-rate debt.

Defensives and commodities

Health care and consumer staples each gained more than 2%, the usual refuge when growth shares sell off. Gold fell 1.66% to about $4,108 an ounce and silver lost 6.13%, since a stronger dollar and hike bets raise the cost of holding metals that pay no yield. West Texas Intermediate rose 1.0% to $95.09 and Brent reached $106.06.

Thursday brings producer prices and retail sales. A firm retail print would show households still spending through the fuel shock, and would add to the case for the Fed to act.

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