U.S. inflation edges up, housing starts fall sharply

"The trickle-down effect of the housing number is going to be amazing," said Dan Cook, senior market analyst at IG Markets, Chicago. "It's likely that more construction crews will get cut after this, and the supplier who supply those crews will be hurt as well. This is not good news at all."

A separate report from the Labor Department showed the Consumer Price Index rose 0.3 percent, a touch above market expectations for a 0.2 percent increase, after rising an unrevised 0.2 percent in September.