U.S. stock futures retreated on Tuesday as the August consumer-price index came in surprisingly hot, sending short-term Treasury yields to their highest levels since 2007, while derivatives traders priced in a 20% chance of a 100 basis-point interest-rate hike when the Fed meets later this month. Futures for the S&P 500 SPX, -4.32% were down 71 points, or 1.8%, to 4,058, Nasdaq 100 futures COMP, -5.16% were down 308 points, or 2.4%, to 12,515, and Dow Jones Industrial Average DJIA, -3.94% futures were down 416 points, or 1.3%, to 32,080. The yield on the two-year Treasury note rose to 3.712%, its highest level since at least late 2007. Fed funds futures, a gauge of traders’ expectations for the path of future Fed rate hikes, were pricing in an 80% chance of a 75 basis point rate hike from the Fed later this month, compared to roughly 70% a day earlier. Meanwhile, they were also pricing in a 20% chance of a 100 basis point hike, compared to 0% a day earlier. The dollar climbed along with Treasury yields, as the ICE U.S. Dollar Index DXY, +1.55% rose 0.6% to 108.96, while gold GC00, -0.33% turned lower to trade at $1,722 per ounce, down 1.1%. The CPI number released Tuesday morning showed inflation rose 0.1% in August, compared with expectations for a drop of 0.1% from a survey of economists by the Wall Street Journal.
