NEW YORK - Wall Street stocks fell on Wednesday following a hotter-than-expected US inflation reading, with the Nasdaq particularly hit due to weakness in leading artificial intelligence equities.
The consumer price index was up more than analysts expected in September, rising 3.7 percent on a year-on-year basis, a marked increase from August's 3.4 percent reading.
"Today's CPI report came in hot, with annual headline inflation reaching its highest level since May," said eToro analyst Bret Kenwell.
"The knee-jerk reaction may be for traders to reassess the odds of a Fed rate hike later this month," he said.
While all three major US indices dropped, the Nasdaq suffered the deepest declines, losing nearly two percent.
The inflation report was troubling enough to suggest that the Fed's September interest rate hike was "was not one and done," said Angelo Kourkafas of Edward Jones, who described the weakness in AI names as related to the interest rate outlook.
"As we are navigating this higher-for-longer rate environment, we are seeing the realisation that the cost to borrow is moving higher and we know there's a massive cost of building all the AI Infrastructure," Kourkafas said.
Data centre operator CoreWeave lost more than 15 percent, while chip companies Nvidia and AMD also fell sharply.
In Europe, the day ended higher in London, Paris and Frankfurt after Asian equities struggled to claw back the previous day's steep tech losses.
Tech firms had taken a hammering on Tuesday amid concerns about China's progress in developing AI chips and following comments by Broadcom's chief executive likening the AI buying frenzy to gambling.
Tokyo and Seoul, both with big tech weightings, closed lower again on Wednesday.
Hong Kong and Shanghai also fell, with investors appearing unmoved by data showing China's exports picked up pace in September and soared 36.3 percent, far more than expected.
Investors also assessed largely upbeat earnings from Dutch chipmaking equipment giant ASML, which reported record sales and strong profits on huge demand for AI.
ASML shares rose 1.7 percent on the Amsterdam stock market.
Shares in Lufthansa descended 2.2 percent after Portugal announced the German airline group had been chosen to take a 44.9 percent stake in TAP for 1.03 billion euros as part of the reprivatization of the airline.
Bank of America finished down 4.8 percent after US agencies fined the lender $1.2 billion for violating anti-money laundering laws.
- AFP