Wall Street's main indexes edged lower on Wednesday after a hotter-than-expected inflation report boosted bets of an interest rate hike this month, while investors parsed more big bank earnings.
Data showed US consumer prices accelerated in September amid a surge in gasoline costs, leading traders to bolster bets of a rate hike in October. They now see a 46% chance of a quarter-point increase compared with a 21.6% chance before the figures, according to LSEG-compiled data.
"It certainly increases the odds of the Federal Reserve raising rates at the October meeting, but I believe they're not going to, because we have never had two rate hikes within two months of midterm election," said Sam Stovall, chief investment strategist at CFRA Research.
Stovall said given the Fed had taken a hawkish stance on monetary policy, the data makes a December rate hike increasingly likely.
Markets also digested another round of bank earnings. Bank of America was down 8.5% after the lender's profit fell in the third quarter as it set aside $1.2 billion to cover regulatory fines, while Morgan Stanley dipped 3.4% despite a rise in quarterly profit.
The S&P 500 Banks index fell 2.4% to its lowest level in over four months.
Asset manager BlackRock gained 2% after reporting a jump in third-quarter profit, helped by higher fees from managing client funds.
At 10:09 a.m. ET, the Dow Jones Industrial Average fell 32.80 points, or 0.06%, to 51,637.30, the S&P 500 lost 46.65 points, or 0.60%, to 7,758.80 and the Nasdaq Composite lost 216.07 points, or 0.78%, to 26,988.31.
Seven of the 11 major S&P 500 sectors declined. Sectors considered traditionally defensive rose, with consumer staples and healthcare stocks up 0.9% and 1.7%, respectively.
The S&P 500 technology index was trading at over two-week lows, as chip stocks came under pressure again. They lost ground on Tuesday after reports pointing to progress in chip design by China's CXMT fueled competition concerns.
Shares of Intel and Micron fell 2.6% and 1%, respectively, while Nvidia slipped 1.7%.
Most "Magnificent Seven" stocks declined, barring Alphabet and Apple, which rose 0.2% and 0.9%, respectively.
Remarks from Richmond Fed President Tom Barkin and the Fed's Beige Book report on regional economic conditions are also due late in the day.
Oil prices edged higher on Wednesday, with Brent crude holding above the $100-a-barrel mark after two vessels were struck in the Strait of Hormuz and Iranian officials told Reuters they were deploying new tactics to target ships.
Among individual movers, Liquidia jumped 28% after the drugmaker said it settled all six pending lawsuits with United Therapeutics, ensuring uninterrupted access to Yutrepia, a drug used to treat patients with a form of pulmonary hypertension.
Declining issues outnumbered advancers by a 5.57-to-1 ratio on the NYSE and by a 3.3-to-1 ratio on the Nasdaq.
The S&P 500 posted 11 new 52-week highs and 9 new lows while the Nasdaq Composite recorded 16 new highs and 309 new lows.
