U.S. stock index futures fell sharply on Tuesday after data showed a faster-than-expected rise in August consumer prices, cementing bets of a third straight 75-basis-point rate hike from the Federal Reserve next week.

The Labor Department's consumer price index (CPI) report showed monthly CPI rose 0.1% in August from July, against expectation of a 0.1% contraction, while on a year-on-year basis it edged down to 8.3% from 8.5%.

Excluding the volatile food and energy components, core CPI likely increased to 6.3% from 5.9% in July, putting further pressure on the Fed to continue on its rate-hiking spree.

Policymakers last week emphasized their determination to keep raising rates until there is a sustained drop in inflation, which has been running at 40-year highs and above the Fed's target of 2%.

Money markets now see a 79% chance of a 75-basis-point increase in rates and 21% chance of a whopping 100 bps hike by the Fed at its Sept. 20-21 meeting.

As of 10:55 a.m. EDT, the Dow Jones Industrial Index was down 863.28, a decline of 2.67% to 31,518.06; the S&P 500 slipped 125.15, down 3.04% to 3,985.26; and the Nasdaq dropped by 469.01, down 3.82% to 11,797.40.

The dollar, which has risen sharply this year in part due to expectations of aggressive rate hikes by the Fed, erased losses to turn positive.

Mega-cap technology stocks including Apple Inc and Microsoft Corp fell about 2% each, while Tesla Inc, Alphabet Inc, Amazon.com Inc and Meta Platforms Inc dropped between 2.5% and 3.2% as Treasury yields moved higher.