Wall Street Falls as Investors Digest Inflation Data

Wall Street's main indexes fell Thursday after a U.S. Treasury auction sent bond yields higher while investors were already digesting data that showed consumer prices rose more than anticipated in September.

Surging shelter costs pushed consumer prices higher last month while the annual increase in the core figure, excluding volatile food and energy components, was the smallest in two years.

After the data, the S&P 500 spent the morning zig-zagging between red and green. It turned decisively lower after a 1 p.m. EDT (1700 GMT) auction of 30-year U.S. Treasuries met weak demand.

"The biggest overhang to the market the last two months has been the rise in interest rates. Any meaningful move one way or the other on any given day is going to have an impact on equities," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

After Thursday's auction "the magnitude of the move higher in rates caused a significant downward dislocation in equities across the board," James added.

According to preliminary data, the S&P 500 lost 27.50 points, or 0.63%, to end at 4,349.45 points, while the Nasdaq Composite lost 85.46 points, or 0.63%, to 13,574.22. The Dow Jones Industrial Average fell 173.77 points, or 0.51%, to 33,631.10.

U.S. benchmark 10-year yields rose after the inflation data and rose further to hit a session high after the auction. The benchmark yield rose as high as 4.728%, after falling for two straight days.

The rise in yields particularly pressured rate-sensitive sectors such as utilities and real estate, often viewed as bond proxies.

Homebuilding stocks fell after the data and came under more pressure after the afternoon increase in bond yields. The iShares Home Construction ETF was down sharply.

Of the S&P 500's 11 major sectors energy and information technology were under least pressure during the session.

Traders now expect a stronger chance the Fed will end up delivering another interest-rate hike this year, and keep rates higher for longer next year.

Boston Fed President Susan Collins, who does not have a vote on the rate-setting Federal Open Market Committee (FOMC) this year, said on Wednesday that while the odds of the economy escaping a recession have grown, it is possible the central bank is not done with interest rate hikes aimed at bringing inflation back to its target.

Meanwhile, Israel said there would be no pause in its siege of the Gaza Strip for aid or evacuations until all its hostages were freed.

Investor focus may soon shift to the earnings season on Friday, with big banks including JPMorgan Chase, Wells Fargo and Citigroup reporting their quarterly numbers before the market open.

Among individual stocks, Fastenal rallied after the industrial supplies company beat third-quarter profit estimates.

Ford Motor fell after the United Auto Workers (UAW) union expanded its strike at the company's biggest and most profitable factory.