LIVE MARKETS-US equities close lower with inflation boosting bets on rate hikes

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US EQUITIES CLOSE LOWER WITH INFLATION BOOSTING BETS ON RATE HIKES

Wall Street's three major indexes finished lower with the Nasdaq Composite .IXIC leading declines, off 0.7%, as investors braced themselves for more aggressive tightening from the Federal Reserve after October's consumer inflation report showed that prices are still elevated.

Tuesday's decline in oil prices to two-month lows offered some support. But investors were mostly worried about stubborn inflation and the prospects for higher interest rates with commentary from Fed officials solidifying those concerns.

Traders were last betting on a 9.5% probability that the Fed would raise rates by half a percentage point in December compared with zero bets for this size of a hike before the inflation data, released before market open on Tuesday, according to the latest data from CME Group's FedWatch tool. The odds for a quarter-percentage-point increase in rates rose to 90.5% from 84% on Monday. And lastly traders saw zero chance that the Fed would keep rates where they are (3.75%-4.00% range) after the meeting, down from 16% on Monday.

Fed officials also helped dispel any remaining doubt in investors' minds that the odds for a hike had changed.

Dallas Federal Reserve President Lorie Logan said the US central bank needs to deliver at least two more quarter-percentage-point interest rate increases to bring down inflation, and may need to do so promptly to keep broadening price pressures from getting baked into the economy.

Kansas City Federal Reserve President Jeff Schmid said that inflation is "top of mind" as he signaled support for tightening policy to bring it under control, saying that he didn't think interest rates were restrictive last year, and that he believes "today it's fairly accommodative."

And hours before the data was released, Fed Governor Chris Waller had said that the Fed will need to take more aggressive monetary policy action if inflation continues to move away from its target.

Meanwhile, a report from the Federal Reserve Bank of New York said on Tuesday that the overall level of troubled borrowing in the US economy rose modestly in the third quarter but did not appear to signal a notable deterioration in credit quality.

Still. the indexes did manage to close above their session lows. And while the heavyweight technology sector .SPLRCT fell 1.4% and was the biggest drag on the S&P 500, five of the benchmark's 11 major sectors managed to close higher with financials' .SPSY 0.5% advance leading the charge.

Here is your closing snapshot:

(Sinéad Carew)

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