Stocks drop to session lows; bonds fall on auction

U.S. stocks fell by the most in a month and Treasury yields spiked higher as a hot inflation reading roiled financial markets.

U.S. stocks fell by the most in a month and Treasury yields spiked higher as a hot inflation reading roiled financial markets.

The S&P 500 fell to session lows in afternoon trading after a 30-year Treasury auction went off at higher yields than anticipated. Two-year yields also shot higher after data showed the fastest annual inflation rate since 1990, upending bets on the timing for the next interest rate increase.

The Nasdaq 100 led declines in equities as its highly valued tech members are deemed most susceptible to the impact from inflation. Gold surged with Bitcoin, while the dollar pushed higher. Oil slumped.

Risks are building for both stocks and bonds as persistent elevated inflation could force the Federal Reserve to taper at a more substantial rate or hike interest rates faster than anticipated. The U.S. consumer price index increased 6.2 per cent in October from a year earlier, beating expectations for 5.9 per cent, according to Bloomberg data. 

“Now that it’s breached that 6 per cent level, I think the Fed are going to be getting a little bit hot under the collar,” Fiona Cincotta, senior financial markets analyst at City Index, said by phone. “There is no way, I think, they can ignore 6.2 per cent on that CPI reading. It’s going to be prompting a more hawkish feel.”