Cheaper oil cannot settle the inflation problem
Falling oil helped Wall Street recover on Monday. Tuesday’s inflation report showed why that relief may not be enough to sustain the rebound.
At 10:45 a.m. Eastern, the S&P 500 was down 0.7%, the Dow fell 0.6% and the Nasdaq lost 0.8%. Brent crude was also falling, declining 2.4% in the morning snapshot.
The Consumer Price Index rose 0.4% in October, above the 0.3% economists expected. That was an improvement from September’s 0.6% increase.
The more stubborn number was core CPI, which excludes food and energy. It rose 0.3% for a third straight month, missing expectations for a slowdown to 0.2%.
Strong AI demand can coexist with falling share prices. Higher rates reduce the present value of distant profits and can make the infrastructure needed to deliver them more expensive to finance.
That is the problem confronting the recovery: cheaper energy offers some relief, while persistent underlying inflation keeps pressure on the cost of capital.
Waller’s warning meets the number he named
Before the report was released, Fed Governor Christopher Waller said core inflation around 0.3% or higher would warrant considering a 50-basis-point increase in December.
The data subsequently landed at that level.
By midmorning, market-implied odds of a half-point hike approached 15%. A quarter-point increase remained the main expectation, but the possibility of faster tightening had become more meaningful.
The move was visible in bonds. The 10-year Treasury yield climbed toward 5%, raising the benchmark against which many loans and investments are priced.
October’s report lacked a headline annual inflation rate because the government shutdown prevented collection of the necessary October 2025 comparison data. The monthly readings still supplied a clear signal: underlying price pressure had not cooled as expected.
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The financing bill already appears in company results
Higher yields reach different businesses through different channels.
Homebuilders face customers whose purchasing power depends on mortgage payments. Lennar fell 5% in morning trading as the bond sell-off pressured the sector.
For AI infrastructure providers, borrowing helps finance the equipment and facilities needed to serve customers.
CoreWeave (NASDAQ: CRWV) reported $640 million in net interest expense against $2.575 billion in revenue for the quarter ended June 30. Net interest expense was therefore equivalent to approximately one-quarter of revenue.
That is an existing expense burden, not a calculation of what another Fed hike would cost. Changes in future borrowing costs depend on debt terms, hedging and refinancing needs.
It nevertheless shows why revenue growth alone cannot explain the economics of the infrastructure build-out. Interest, depreciation and construction spending all affect how much value reaches shareholders.
Goldman’s valuation case faces a tougher backdrop
Goldman Sachs remains constructive on parts of the semiconductor industry.
Analyst James Schneider described chip stocks as oversold, highlighting Nvidia, Broadcom and AMD. His argument included valuations of roughly 12 times for Nvidia and 13 times for Broadcom against a modeled 2028 “no growth” baseline.
Those are scenario-based valuations. Their appeal depends on the assumptions behind that baseline, while higher yields can still reduce the multiple the market assigns to future profits.
Nvidia also carries a separate burden. Its shares fell 5.3% in the morning snapshot as the board’s investigation involving Jensen Huang continued to weigh on the company.
The next operating evidence arrives quickly. CoreWeave’s third-quarter results call is scheduled for 5 p.m. Eastern today, ahead of the Fed’s December 8–9 meeting.
Customer growth can support the AI story. The recovery also needs evidence that companies can finance and deliver that growth without letting the cost of capital consume the return.
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