U.S. stocks were set to open sharply lower on Wednesday as consumer prices rose more than expected in April, fuelling concerns about aggressive monetary policy tightening.

The Labor Department's report showed consumer price index rose 0.3% last month, the smallest gain since August, but still above economists' forecast of a 0.2% rise.

The monthly rise in inflation was much smaller compared to the 1.2% surge in March, the largest increase since September 2005, but traders raised their bets that the Federal Reserve will hike rate by a bigger 75 basis points (bps) in June.

Money market futures are now pricing in an 81% chance of a 75 bps hike next month. [IRPR]

"A bit of an upside surprise on all counts, so the peak inflation story will definitely have to be kind of reconsidered in light of this data," said Ross Mayfield, chief investment strategist at Baird Private Wealth Management.

"They're pretty well locked on to 50 basis point rate hikes. The data is an upside surprise, but it's still a drop from March. So in a sense, they're probably on the right path and they will continue with their previously laid out plan."

Investors have been concerned about whether aggressive moves from the central bank to curb decades-high inflation could tip the economy into recession, with latest coronavirus lockdowns in China deepening worries about faltering global economic growth.

The tech-heavy Nasdaq closed higher on Tuesday but remains close to an 18-month low hit earlier this week as megacap growth stocks fell sharply on worries about rising rates denting future cash flows.

At 08:50 a.m. ET, Dow e-minis were down 170 points, or 0.53%, S&P 500 e-minis were down 31 points, or 0.78%, and Nasdaq 100 e-minis were down 153.5 points, or 1.24%.

Following the inflation data, yield on the benchmark 10-year Treasury note climbed back above 3%, putting pressure on interest-rate sensitive growth stocks. [US/]

Megacap stocks such as Amazon.com, Microsoft Corp, Apple Inc, Google owner-Alphabet Inc, Meta Platforms and Tesla Inc fell between 1.0% and 1.5%.

Coinbase Global Inc fell 22.9% after first-quarter revenue missed estimates amid a turmoil in global markets which has curbed investor appetite for risk assets.