The major averages finished Friday with solid gains, building on a relatively quiet start as a sharp retreat in crude oil and encouraging developments surrounding U.S.-Iran discussions helped broaden the advance during the second half of the morning. The S&P 500 (+0.5%) and Nasdaq Composite (+0.5%) ended with matching gains, while the DJIA (+0.9%) outperformed. The Russell 2000 (+0.1%) and S&P Mid Cap 400 (+0.3%) also participated after spending much of the morning below their flat lines.

Oil was a key influence on the change in tone. WTI crude had been only modestly lower earlier in the session before reports pointed to further movement in efforts to reach an agreement involving the Strait of Hormuz. CBS News, citing Al Jazeera, reported that U.S.-Iran talks had entered a technical phase with a potential Hormuz agreement in focus, while Axios reported that Qatar and Iran were awaiting a U.S. response to Iran's proposal. President Trump also urged Chinese President Xi to reduce China's support for Iran.

Additional afternoon comments reinforced the prospect for diplomatic progress. A U.S. official told NewsNation reporter Libby Dean that discussions between U.S. and Iranian officials through mediators were "positive and constructive," while noting that the U.S. was not in a rush to reach an agreement. The official also said nearly 40 million barrels of oil had transited the Strait of Hormuz over the previous 48 hours.

WTI ultimately settled $2.51 lower (-2.7%) at $92.17 per barrel. The sizable reversal in oil helped alleviate some of the inflation-related pressure associated with elevated energy prices and coincided with the market's move to its best levels of the day.

Technology provided another important source of support throughout the session. The information technology sector (+1.0%) finished among the leaders, while the PHLX Semiconductor Index advanced 1.4%. Microsoft (MSFT 516.17, +18.24, +3.66%) was a notable mega-cap and DJIA outperformer, helping the blue-chip index post the strongest gain among the major averages.

Strength also extended beyond technology as the session progressed. The industrials sector (+0.9%) outperformed amid strength in semiconductor-linked names such as Bloom Energy (BE 288.70, +22.05, +8.27%), while the financials sector (+0.5%) also contributed.

Eight S&P 500 sectors ultimately finished higher, although overall market breadth was only modestly positive.

Several individual stocks also stood out. Costco (COST 922.76, +26.28, +2.93%) advanced following its Q4 report, which featured better-than-expected earnings alongside resilient comparable-sales growth and improving renewal rates. Akamai Tech (AKAM 113.94, +3.53, +3.20%) rallied after significantly expanding its relationship with Anthropic through an $11.6 billion contractual commitment over seven years, with potential additional commitments bringing the relationship to as much as $20 billion.

The day's weakest areas reflected two of the session's more pronounced reversals. The energy sector (-0.9%) declined alongside the drop in crude oil, while the communication services sector (-0.7%) was pressured as Meta Platforms (META 751.66, -25.93, -3.33%) pulled back following its substantial Muse-driven rally in recent weeks. The real estate sector (-0.4%) was the only other sector to finish lower.

Attention will remain on rates next week as the August Personal Income and Spending report, which includes the PCE Price Index, is due Wednesday. The CME FedWatch Tool currently assigns a 64.2% probability to another 25-basis-point rate hike at the October FOMC meeting.

Friday's advance ultimately combined renewed strength in technology and semiconductors with relief from the recent pressure in crude oil. The decline in oil and encouraging U.S.-Iran developments helped broaden participation beyond the technology stocks that led the market early in the session, allowing all five major averages to finish higher. The gains also left the major averages higher for the week, with the DJIA snapping a three-week losing streak.

U.S. Treasuries had a roller-coaster day but finished the cash session on a positive note. Trading action was dictated by swings in oil prices and some sense that Treasuries were operating in a short-term oversold condition and were due for a bounce. The 2-year note yield settled down six basis points to 4.85% (+10 basis points this week), and the 10-year note yield settled down two basis points to 5.16% (16 basis points this week). 

• Nasdaq Composite: +16.5% YTD
• Russell 2000: +14.3% YTD
• S&P 500: +13.1% YTD
• S&P Mid Cap 400: +10.4% YTD
• DJIA: +7.8% YTD

Reviewing today's data:

• Aug Durable Orders 0.0% (Briefing.com consensus -0.4%; Prior 0.9% revised from 1.1%)
• Aug Durable Goods --ex transportation 0.3% (Briefing.com consensus 0.5%; Prior 0.7% revised from 0.4%)
• The final reading for the University of Michigan Consumer Sentiment Index for September increased to 48.1 (Briefing.com consensus: 47.8) from the preliminary reading of 47.8. The final reading for August was 51.7. In the same period a year ago, the index stood at 55.1.
  • The key takeaway from the report is that high prices continue to adversely affect consumer sentiment, souring the short-run outlook for business conditions and expectations for year-ahead personal finances.