Fed Rate Hike Fears Rise as Inflation Cools Less Than Expected

October inflation cooled in October but fell short of Wall Street expectations, prompting investors to seriously consider a half-point Federal Reserve rate hike in December, a potential threat to an already shaky AI trade. Stocks fell, with the S&P 500 down 0.4% and the Nasdaq down 0.7%. The Consumer Price Index rose 0.4% month-over-month, down from September's 0.6% but above the expected 0.3%. Gasoline prices slowed sharply, but housing costs drove over 30% of the increase, with medical care and car insurance also rising. No year-over-year figure was available due to last year's government shutdown. Strong October jobs data and revised September figures give the Fed less reason to pause, and Fed Governor Christopher Waller signaled a half-point hike is possible if core CPI hit 0.3%, which it did. Market odds for a half-point hike jumped 11.1%, and rising bond yields are increasing borrowing costs for companies.