Hot CPI and Nvidia weigh on US indices as Nasdaq 100 leads declines

Monday's recovery loses about a sixth across NASDAQ, SPX and DJIA.
With the 10-year yield above 5%, Fed Governor Waller raises the possibility of a half-point hike in December.
Friday brings October producer price data, following September's 1.3% surge.

US equities are under pressure, with all three stock indices surrendering about a sixth of Monday's rebound as a hot October Consumer Price Index (CPI) reading fuels discussion of a half-point Fed rate hike. After erasing about half of Monday's advance and touching a session low just above 27,400, the Nasdaq 100 has returned to around 27,750. The S&P 500 stands close to 7,525, while the Dow Jones Industrial Average is around 52,250.

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An October increase of 0.4% in consumer prices exceeded the 0.3% forecast. Fed Governor Waller had indicated that an overshoot of this kind could warrant a half-point December rate hike. No annual reading accompanied the release because the 2025 government shutdown left October 2025 without a figure. The annual rate will return on 10 December, a day after the Fed's decision. Meanwhile, the 10-year Treasury yield has moved back above 5%; higher yields reduce what equity buyers are willing to pay for future profits.

All three indices are being weighed down by a decline in Nvidia (NVDA), the world's most valuable company, which had also trailed Monday's rally. Its shares are falling after Chief Executive Jensen Huang admitted to an affair with a woman accused of spying for China. With chip stocks carrying a greater weight in the NASDAQ 100 than in the other two indices, it is recording the largest decline of the three.

Which upcoming events could shape the rate decision?

Comments from three voting officials could offer clues to the size of the December 8-9 rate move, with traders viewing a hike as close to certain. Fed Vice Chair for Supervision Bowman and Philadelphia Fed President Paulson are scheduled to speak on Tuesday at 23:30 GMT, followed by Cleveland Fed President Hammack on Thursday at 14:00 GMT. All three have a vote on that decision.

Thursday's weekly jobless claims release at 13:30 GMT is expected to show 195K, compared with the previous 189K. Attention then turns to October producer prices, due on Friday at 13:30 GMT. A rise of 0.4% is forecast after September's 1.3% jump, making this the next inflation reading relevant to the prospect of a half-point hike.

Where do the indices stand on the charts?

About a quarter of the NASDAQ 100's decline from its 6 October peak near 31,350 has now been recovered. The S&P 500 has retraced roughly two-fifths of the distance between its 6 November low near 7,325 and its October high just below 7,850. For the Dow Jones Industrial Average, the current level is close to the midpoint of the 50,500-53,800 band that has contained it since mid-September.

Nasdaq 100 index: daily chart view

Nasdaq: common questions answered

How did the Nasdaq develop?

Based in the US, the Nasdaq began as an electronic system for stock quotations before developing into a stock exchange. Initially, its role was limited to supplying quotes for over-the-counter (OTC) shares. By 1991, it accounted for 46% of the overall US securities market, and in 1998 it became the country's first stock exchange to offer online trading. It also compiles several indices, including the Nasdaq 100 and its broadest measure, the Nasdaq Composite, which covers all 2,500-plus stocks listed on the Nasdaq.

Which companies does the Nasdaq 100 track?

Comprising 100 non-financial companies listed on the Nasdaq stock exchange, the Nasdaq 100 is a large-cap index. These companies represent only a small portion of the exchange's thousands of stocks but account for over 90% of its movement. Each constituent's influence is weighted by market capitalisation. Technology-focused businesses feature prominently, alongside companies in other industries and those based outside the US. Since 1986, the Nasdaq 100 has delivered an average annual return of 17.23%.

What are the ways to trade the Nasdaq 100?

Traders can access the Nasdaq 100 through several instruments. Contracts for Difference (CFD) are offered for bets on the index by most retail brokers and spread betting platforms. For investors with a longer-term horizon, Exchange-Traded Funds (ETFs) provide share-like trading while tracking the index, removing the need to buy shares in all 100 constituent companies. The Invesco QQQ Trust (QQQ) is one example. Futures contracts on the Nasdaq 100 let traders speculate on the index's future direction. Options, meanwhile, give holders the right, without an obligation, to buy or sell the Nasdaq 100 in the future at a specified price, known as the strike price.

Which Factors Influence the Nasdaq 100?

The combined performance of its constituent companies, as reported in quarterly and annual earnings, is the primary driver of the Nasdaq 100, although several other factors play a role. Macroeconomic releases from the US and elsewhere affect investor sentiment, with positive sentiment supporting gains. Interest rates determined by the Federal Reserve (Fed) matter as well, since they influence borrowing costs for the many corporations that depend heavily on credit. Inflation can therefore be a significant driver, alongside other indicators that shape the Fed's decisions.