Wall Street closed lower on Wednesday, 14 October, after US inflation exceeded expectations in September, deepening fears of a further interest rate increase by the Federal Reserve. The Nasdaq led losses in a session marked by pressure on technology stocks and a flurry of bank earnings releases.

The Dow Jones Industrial Average retreated 0.09% to 51,621.48 points, the S&P 500 fell 1.11% to 7,718.94 points, and the Nasdaq dropped 1.88% to 26,692.87 points. Gains of between 3.3% and 3.9% in UnitedHealth, Amgen, and Merck helped limit the Dow’s decline.

Year-on-year inflation accelerated from 3.4% in August to 3.7% in September. Excluding food and energy, the rate stood at 2.6%. The core component posted a monthly rise of 0.3%, above the 0.2% that economists had forecast.

Petrol was among the principal drivers of price pressure, surging 9.1% against the previous month, according to the US Bureau of Labor Statistics.

The data prompted investors to increase bets on another rate rise in October. US Treasury yields climbed following the inflation release, though they pared gains as the session progressed. According to CME data cited by the Associated Press, the probability of a rate increase at the Fed’s next meeting rose to nearly 35%, up from 22% the previous day.

The prospect of higher interest rates weighed most heavily on technology stocks, whose valuations are particularly sensitive to borrowing costs and expectations of future earnings. Investors also continued to assess the scale of capital expenditure on artificial intelligence and the ability of companies to convert those investments into revenue.

In the banking sector, Bank of America reported a net profit of US$6.93 billion in the third quarter, down 17% year-on-year, equivalent to US$0.91 per share. The results included a US$1.2 billion charge related to a regulatory penalty. Excluding that item, adjusted earnings per share came in at US$1.08.

Revenue reached approximately US$30 billion, while net interest income grew 8% to US$16.4 billion, supported in part by growth in lending and deposits. Conversely, revenue from fixed income, currency, and commodities trading fell 17%, and investment banking fees declined 11%.

Morgan Stanley posted a profit of US$4.91 billion, up 6.5% from a year earlier, with earnings per share of US$3.03. Revenue rose approximately 12% to US$20.34 billion.

Equity trading was one of the primary drivers of performance, with revenue climbing 41% to approximately US$5.8 billion. Wealth management achieved record revenue, while fixed income trading recorded a decline of around 7%.

Tensions in the Middle East also kept markets alert to risks to energy supply. Brent crude closed up 0.35% at US$106.06 per barrel, adding to concerns over the persistence of inflation.