Stock Market Update

[BRIEFING.COM] Although premarket indications pointed to another mixed, subdued opening, stocks came under considerable selling pressure at the start of the session after the September CPI (0.6%; Briefing.com consensus: 0.6%) and core CPI (0.3%; Briefing.com consensus: 0.2%) reports showed both headline and core inflation accelerating on a year-over-year basis, moving further away from the Fed's 2.0% target.

The acceleration in inflation prompted a sharp increase in rate hike expectations, with the CME FedWatch tool now assigning a 43.7% probability to a 25-basis-point hike at the October FOMC meeting, up from 22.1% yesterday. Treasury yields also moved higher in response, although they have since moderated somewhat, leaving the 10-year note yield up three basis points at 5.25%.

The major averages remain broadly lower, with continued weakness in mega-cap and technology stocks weighing on the S&P 500 (-0.8%) and Nasdaq Composite (-1.1%). The DJIA (flat), meanwhile, is holding near its unchanged level for both the session and the week, supported by relative strength in select defensive and energy stocks.

The selling pressure is widespread, with decliners outpacing advancers by roughly 4-to-1 on the NYSE and more than 3-to-1 on the Nasdaq. The heavily weighted information technology sector (-1.6%) is the worst-performing S&P 500 sector, pressured by weakness in semiconductor stocks, while the Vanguard Mega Cap Growth ETF (-1.3%) also underperforms. Other rate-sensitive areas of the market are facing considerable pressure, including homebuilders, with the iShares U.S. Home Construction ETF (-2.4%) declining sharply, while the Russell 2000 (-1.5%) trails the major averages.