Scenes near Wall Street and the New York Stock Exchange (NYSE), in New York
Scenes near Wall Street and the New York Stock Exchange (NYSE), in New York

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.

At 8:36 a.m. ET, Dow e-minis were down 332 points, or 1.03%, S&P 500 e-minis were down 59.75 points, or 1.45%, and Nasdaq 100 e-minis were down 265.5 points, or 2.08%.

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.