The possibility of a $14 billion fine for Deutsche Bank and a slide in oil prices hit financials and energy stocks on Friday, leading major global stock indexes lower.
U.S. data showing a strong increase in consumer prices last month bolstered expectations that the Federal Reserve will raise interest rates later this year, helping send U.S. Treasury yields and the dollar higher.
Stocks fell as investors dumped shares of banks in North America and Europe after the U.S. Department of Justice proposed Deutsche Bank pay $14 billion to settle an investigation into its selling of mortgage-backed securities.
Deutsche Bank, whose shares dropped roughly 8.5 percent, said it would fight the demand.
MSCI’s world stocks index was down 0.49 percent and notched its second straight weekly loss.
Energy shares fell as crude oil prices slid by up to 2 percent to multi-week lows after swelling Iranian exports reinforced fears of a global glut.
Brent crude settled down 82 cents, or 1.76 percent, at $45.77 a barrel, while U.S. crude settled down 88 cents, or 2 percent, at $43.03.
While traders have all but ruled out the possibility of the Fed raising interest rates at its meeting on Tuesday and Wednesday, residual doubts and questions about when the U.S. central bank may finally pull the trigger hurt sentiment on Wall Street.
The uncertainty over next week’s Fed meeting as investors tweak their portfolios ahead of the next interest rate hike weighed on the market, according to Jeff Carbone, cofounder of Cornerstone Financial Partners in Charlotte, North Carolina.
The Dow Jones industrial average fell 88.68 points, or 0.49 percent, to close at 18,123.8, the S&P 500 lost 8.1 points, or 0.38 percent, to end at 2,139.16 and the Nasdaq Composite dropped 5.12 points, or 0.1 percent, to finish at 5,244.57.
The S&P energy index closed down 0.86 percent while the S&P financials index ended down 0.91 percent.
European shares posted their worst weekly performance in three months. Europe’s broad FTSEurofirst 300 index closed down 0.79 percent on the day.
U.S. Treasury yields, meanwhile, rose after the stronger-than-expected inflation data.
Benchmark 10-year notes were up 4/32 in price to yield 1.6891 percent, down from 1.703 percent on Thursday but slightly higher than the 1.67 percent before the inflation figures.
The so-called core CPI, which strips out food and energy costs, increased 2.3 percent in the 12 months through August, above the Fed’s target of 2 percent annual inflation.
The uptick in inflation is likely to be welcomed by Fed officials when they meet next week to deliberate on monetary policy.
“It certainly is another thing that could help them increase their trend toward normalization,” said Mary Ann Hurley, vice president in fixed income trading at D.A. Davidson in Seattle.
Futures traders are pricing in a 51.8 percent chance the Fed will raise rates at its December meeting, up from 47.5 percent on Thursday, according to the CME Group’s FedWatch Tool.
The U.S. dollar hit a more than two-week high against a basket of major currencies after the inflation data boosted bets the Fed would turn more hawkish.
The dollar index, which measures the greenback against a basket of six major currencies, was up 0.81 percent to 96.059.
Spot gold prices slid 0.25 percent to $1,310.50, a two-week low.