Weekly Wrap

The major averages finished mostly higher for the week as pronounced strength in semiconductor and mega-cap growth stocks outweighed a sharp midweek rise in Treasury yields and weakness across much of the broader market. The S&P 500 gained 1.2% and the Nasdaq Composite climbed 2.1%, while the DJIA advanced a more modest 0.3%, snapping a three-week losing streak. Small- and mid-cap stocks moved in the opposite direction, with the Russell 2000 falling 0.8% and the S&P Mid Cap 400 slipping 0.1%.

Technology was the primary source of support throughout the week. The information technology sector gained 3.1%, while the PHLX Semiconductor Index surged 6.3% behind renewed enthusiasm surrounding AI development and infrastructure spending. Mega-cap growth stocks also played an outsized role, lifting the Vanguard Mega Cap Growth ETF 2.7%. That combination powered Monday's strong advance and helped the Nasdaq Composite reach fresh all-time highs on Tuesday.

The headline gains nevertheless masked considerably weaker performance beneath the surface. The S&P 500 Equal Weighted Index fell 1.0%, trailing the cap-weighted index by more than two percentage points, while small-cap stocks also finished firmly lower. The divergence was evident across the sector standings, where financials (-1.6%), real estate (-1.4%), and consumer discretionary (-0.5%) sectors declined despite the S&P 500's weekly gain. The utilities sector fell 3.2%, making it the week's weakest-performing sector.

Interest rates were a major factor behind that uneven participation. Treasury yields surged Wednesday after stronger-than-expected preliminary September PMI readings and hawkish Fed commentary reinforced expectations for additional policy tightening. The 10-year note yield jumped 14 basis points that session and continued higher Thursday, reaching 5.18%, before easing modestly on Friday. It still finished the week 16 basis points higher at 5.16%. The increase weighed particularly heavily on smaller companies and rate-sensitive areas even as technology stocks proved comparatively resistant to the backup in yields.

Crude oil provided a more favorable influence on the weekly picture despite substantial volatility. WTI began the week with a sharp decline amid hopes for diplomatic progress between the U.S. and Iran, then rebounded above $96 per barrel as negotiations surrounding the Strait of Hormuz remained uncertain. Encouraging developments later in the week helped crude reverse course again, leaving WTI down nearly 4% for the week. The decline contributed to a 3.0% loss in the energy sector but also helped alleviate some of the inflation-related pressure facing the broader market.

Other areas provided additional support, with the communication services sector gaining 2.2% and the health care sector rising 1.7%. Software stocks also participated in the technology advance, leaving the iShares Expanded Tech-Software ETF up 1.6%, while the iShares U.S. Home Construction ETF gained 2.3% despite the week's increase in Treasury yields.

Overall, the week produced solid gains for the cap-weighted S&P 500 and Nasdaq, but participation remained notably uneven. Semiconductor and mega-cap growth leadership was strong enough to overcome rising Treasury yields and weakness across many other areas, while the Equal-Weight S&P 500 and Russell 2000 finished lower. The late-week retreat in crude oil provided some relief from inflation concerns, but elevated yields and the prospect of additional Fed tightening remained important constraints on the broader market.

• Nasdaq Composite: +2.1% week-to-date
• S&P 500: +1.2% week-to-date
• DJIA: +0.3% week-to-date
• S&P Mid Cap 400: -0.1% week-to-date
• Russell 2000: -0.8 week-to-date

Monday: 

The major averages opened the week with robust gains on Monday, powered by a resurgence in semiconductor and mega-cap stocks alongside meaningful relief from two of the market's recent macro headwinds. The S&P 500 (+1.5%) and Nasdaq Composite (+2.3%) finished near their best levels of the session, while the DJIA (+0.7%) also posted a solid advance.

Technology stocks were at the center of the rally throughout the session. The PHLX Semiconductor Index surged 4.3%, helping the information technology sector (+2.5%) finish among the strongest groups. Advanced Micro Devices (AMD 615.52, +55.70, +9.95%) and Intel (INTC 121.78, +13.18, +12.14%) were two of the best-performing S&P 500 components despite the absence of company-specific catalysts, reflecting renewed momentum across the semiconductor space. AMD reached a new all-time high and crossed $600 per share for the first time, lifting its market capitalization above $1 trillion.

The strength represented a sharp change in tone following recent volatility surrounding AI stocks and debate over whether development of increasingly capable models should be slowed. NVIDIA (NVDA 227.38, +5.11, +2.30%) CEO Jensen Huang pushed back against AI safety concerns in a weekend interview, saying there is a "0% chance" AI ends the world by 2030 and arguing in favor of continued development. President Trump similarly reiterated his support for continued AI development. That backdrop was also complemented by preliminary U.S.-China discussions ahead of this week's meeting between President Trump and Chinese President Xi Jinping. The talks were characterized as successful and established a formal dialogue around AI, with Reuters reporting that the two sides are expected to meet again in two months to discuss AI safety. For now, the absence of an agreement to slow development provided another supportive element for the AI trade and today's semiconductor rally.

Mega-cap strength was equally pronounced, leaving the Vanguard Mega Cap Growth ETF up 2.7%. The communication services sector (+3.9%) topped the sector standings as Meta Platforms (META 741.24, +75.50, +11.34%) surged double-digits, extending its September gain beyond 30%. Enthusiasm surrounding the company's AI efforts remained a major driver, particularly after its Muse AI agent climbed to the top spot among free downloads on Apple's App Store.

The consumer discretionary sector (+1.5%) also outperformed amid the broader strength in growth stocks. The rally nevertheless extended well beyond the largest technology companies. Seven S&P 500 sectors finished higher, including a 1.1% gain in the real estate sector, as the simultaneous retreat in crude oil and Treasury yields provided a more favorable backdrop across the broader market.

Crude oil recorded a particularly sharp decline, with WTI settling $4.47 lower (-4.5%) at $95.77 per barrel. Optimism surrounding the potential for diplomatic progress between the U.S. and Iran at this week's United Nations gathering contributed to the decline, as President Trump has indicated he is open to meeting Iranian President Masoud Pezeshkian.

The energy sector (-2.5%) consequently finished at the bottom of the standings, with Chevron (CVX 203.78, -5.73, -2.73%) weighing on the DJIA.

The utilities (-0.4%) and consumer staples (-0.4%) sectors also finished lower as defensive areas generally lagged the growth-led rally. The health care sector bucked that defensive trend, supported by a surge in Moderna (MRNA 172.94, +18.90, +12.27%) to multi-year highs.

Corporate and speculative pockets of the market provided additional support. Warner Bros. Discovery (WBD 30.80, +3.00, +10.79%) and Paramount Skydance (PSKY 9.91, -0.30, -2.94%) surged after Bloomberg reported that Paramount Skydance reached a settlement with California and other states that had sought to block its acquisition of Warner Bros. Discovery, removing a legal obstacle to the transaction.

Crypto-related stocks also rallied as Bitcoin climbed above $86,000 to its highest level since January, boosting Coinbase Global (COIN 201.05, +6.80, +3.50%), Robinhood Markets (HOOD 123.30, +3.48, +2.90%), and Strategy Inc (MSTR 168.50, +14.58, +9.47%).

Monday's session ultimately combined renewed enthusiasm for AI and semiconductor stocks with a notably more accommodating macro backdrop. The 4.3% surge in the PHLX Semiconductor Index and pronounced mega-cap strength propelled the Nasdaq to a 2.3% gain, while lower crude oil and Treasury yields helped broaden participation beyond technology. With AI development remaining firmly in focus and diplomatic developments contributing to relief in oil and rates, several of the pressures responsible for recent market volatility moved in the opposite direction to start the week.

U.S. Treasuries performed well overnight, as oil prices moved lower, but there was no follow-through in the cash session. The 2-year note yield settled up one basis point to 4.75%, and the 10-year note yield settled donw four basis points to 4.96%. 

There was no economic data of note.

Tuesday:

The major averages finished mixed on Tuesday as continued strength in semiconductor stocks and improving participation beneath the surface offset pronounced weakness in financials and other pockets of the large-cap market. The S&P 500 ended unchanged following Monday's sizable advance, while the Nasdaq Composite (+0.5%) outperformed, reaching record highs. The DJIA (-0.4%) lagged, while the Russell 2000 (+0.5%) and S&P Mid Cap 400 (+0.3%) showed relative strength.

Semiconductor stocks remained the clearest source of support throughout the session. The PHLX Semiconductor Index climbed 2.1%, helping the information technology sector (+0.6%) finish among the better-performing groups, with memory stocks again showing pronounced strength. Chip stocks reached fresh highs during the session after President Trump reiterated his support for continued AI development during his UN General Assembly address, saying the U.S. should be careful with the technology but should not stifle its growth.

The broader mega-cap picture was less supportive than Monday, however. The communication services sector (-1.0%) finished among the laggards after trading higher early in the session, limiting the benefit of semiconductor strength for the cap-weighted S&P 500. That divergence was evident in the stronger performance of small and mid-cap stocks, with the Russell 2000 and S&P Mid Cap 400 both comfortably outperforming the large-cap index.

The financials sector (-1.6%) remained a significant drag through the close. Selling extended across banks, regional banks, insurers, and asset managers amid increased attention to a flattening yield curve, technical weakness across several industry groups, and concerns about softer trading and investment banking activity. Charles Schwab (SCHW 100.35, -6.53, -6.11%), Allstate (ALL 229.36, -13.50, -5.56%), and Wells Fargo (WFC 83.16, -3.38, -3.91%) were particularly pressured, with the group's weakness weighing particularly heavily on the DJIA.

Allstate also faced another potential source of pressure after a New York Times report indicated that Meta Platforms' (META 736.60, -4.65, -0.63% )Muse AI agent has helped users find insurance, highlighting the potential for AI agents to disrupt established consumer-service channels. The same report initially pressured Expedia Group (EXPE 280.70, -0.32, -0.11%), although the stock subsequently recovered after Expedia announced a partnership with Muse to bring AI-powered trip planning to hotels and other travel offerings.

Strength elsewhere was fairly broad. The materials (+1.9%) and consumer staples (+1.2%) sectors finished atop the standings, while the health care sector (+0.6%) also outperformed as Moderna (MRNA 182.56, +9.62, +5.56%) extended its recent surge to fresh multi-year highs.

Homebuilders were another standout pocket of strength, with the iShares U.S. Home Construction ETF climbing 3.2%. Lennar (LEN 83.05, +4.97, +6.37%) remained a notable outperformer after Berkshire Hathaway increased its stake in the company, building on the group's early-session strength.

Crude oil ultimately finished lower despite recovering substantially from its overnight decline. WTI crude settled $0.56 lower (-0.6%) at $95.21 per barrel after President Trump said during his UN address that he believes Iran will reach a deal with the U.S. after the midterm elections. He later said U.S. representatives met with Iranian officials for three hours today in a meeting that went "very well."

The swings in crude were mirrored to some extent in the Treasury market. The overnight decline in oil initially helped pull yields lower, with the 2-year note yield reaching 4.71% and the 10-year note yield falling to 4.92%, before those moves reversed as crude recovered during the session. The 2-year note yield finished unchanged at 4.75%, and the 10-year note yield settled up one basis poiint to 4.97%.

Tuesday's session ultimately featured a sharp divide across the market, with semiconductor strength and gains among small and mid-cap stocks contrasting with pronounced weakness in financials and several mega-cap areas. That dynamic left the S&P 500 little changed, while continued strength in chip stocks helped propel the Nasdaq to record highs

There was no economic data of note today.

Wednesday:

The major averages finished broadly lower on Wednesday as a sharp increase in Treasury yields and another rise in crude oil weighed on the market, while semiconductor and mega-cap growth stocks gave back some of their strong gains from earlier in the week. The S&P 500 (-0.8%), Nasdaq Composite (-1.1%), and DJIA (-0.7%) ended with sizable losses, while weakness was more pronounced in the Russell 2000 (-1.8%). The S&P Mid Cap 400 (-0.6%) held up comparatively well.

Treasury yields were a major source of pressure throughout the session, with selling accelerating after preliminary September PMI data pointed to stronger business activity. The S&P Global U.S. Services PMI increased to 58.7 from 56.5 in August, while the Manufacturing PMI climbed to 57.0 from 53.9. The stronger readings reinforced expectations that additional monetary policy tightening could be needed and helped send yields sharply higher across the curve. Fed Governor Michael Barr (voting FOMC member) added to that pressure by saying his baseline is that further policy adjustments will likely be needed to ensure inflation returns to target in a timely fashion.

Rate-hike expectations moved accordingly, with the probability of a 25-basis-point increase to 4.00-4.25% at the October FOMC meeting rising to 66.4% from 55.4% yesterday, according to the CME FedWatch Tool. Pressure on Treasuries was compounded later in the session by relatively weak dollar demand and foreign participation in the $70 billion 5-year note auction, while the continued rise in crude oil provided another inflation-related headwind. The 2-year note yield climbed 14 basis points to 4.89% after reaching 4.94% intraday, while the 10-year note yield jumped 14 basis points to 5.11% after touching 5.13%.

The rise in rates weighed heavily on some of the market's recent leaders. The PHLX Semiconductor Index fell 1.2% following two exceptional sessions to begin the week, contributing to a 0.7% decline in the information technology sector. Mega-cap growth stocks also pulled back, leaving the Vanguard Mega Cap Growth ETF down 0.9%. Meta Platforms (META 744.10, +7.50, +1.02%) was a notable exception to that weakness, remaining higher amid continued enthusiasm surrounding its Muse AI agent. The stock's gain was not enough to prevent the communication services sector (-1.9%) from finishing among the day's weakest groups, however. Rate-sensitive areas faced some of the most pronounced selling pressure.

The utilities (-1.9%) and real estate (-1.5%) sectors finished sharply lower as Treasury yields surged, while the iShares U.S. Home Construction ETF dropped 2.5%. The consumer discretionary sector (-1.6%) was another notable laggard as higher interest rates and energy costs compounded several stock-specific concerns. Expedia Group (EXPE 259.04, -21.66, -7.72%) and Airbnb (ABNB 149.58, -12.23, -7.56%) suffered sizable losses amid worries that META's Muse AI agent could disrupt established online travel platforms.

McDonald's (MCD 238.35, -12.00, -4.79%) also finished among the day's weaker names after falling to a new 52-week low following the unveiling of its McDonald's > NEXT strategy. Investors reacted negatively to the plan's sizable spending commitments and lengthy timeline as the company contends with slowing U.S. comparable sales and weaker traffic.

Crude oil added another layer of pressure to the broader market, with WTI settling $1.94 higher (+2.1%) at $92.46 per barrel as a U.S.-Iran truce remained elusive. The move provided a clear benefit to energy stocks, leaving the energy sector (+0.9%) as the day's standout performer.

Selling was widespread beneath the major averages, with decliners outpacing advancers by more than 3-to-1 on both the NYSE and Nasdaq. Fewer than half of S&P 500 components are now trading above their 200-day moving averages, underscoring the deterioration in participation even after the strong technology-led start to the week.

Wednesday's retreat ultimately reflected renewed pressure from several of the market's most persistent macro headwinds. Stronger economic data and hawkish Fed commentary pushed Treasury yields sharply higher, rising crude oil added to inflation concerns, and recent semiconductor and mega-cap leaders pulled back. Those pressures extended well beyond technology, with pronounced weakness in small-cap and rate-sensitive stocks contributing to the broad nature of the decline.

Reviewing today's data:

• 09/19 MBA Mortgage Applications Index -1.5%; prior -4.1%
• September S&P Global U.S. Manufacturing PMI - Prelim 57.0; prior 53.9
• September S&P Global U.S. Services PMI - Prelim 58.7; prior 56.5

Thursday: 

The major averages recovered from a sharp morning decline to finish little changed on Thursday, as crude oil retreated substantially from its session high and alleviated one of the pressures that weighed on stocks early in the day. The S&P 500 and Nasdaq Composite ended flat, while the DJIA (-0.3%) logged a modest loss. The Russell 2000 (-0.1%) also finished near its flat line, while the S&P Mid Cap 400 declined 0.4%.

The session began on a considerably weaker note as crude oil surged above $96 per barrel and Treasury yields remained at multi-year highs. The combination weighed particularly heavily on growth stocks, sending the Nasdaq firmly lower and producing broad losses across the market. The tone improved considerably after a Reuters report indicated that a potential phased reopening of the Strait of Hormuz is being discussed. Oil quickly backed away from its highs, easing concerns that another sharp increase in energy prices would add to inflation pressures. WTI crude ultimately settled $2.22 higher (+2.4%) at $94.68 per barrel, still well below its intraday peak.

Treasury yields remained another significant headwind, with an attempted recovery in Treasuries ultimately failing amid concerns about additional Fed tightening, elevated government debt levels, and another soft Treasury auction. New York Fed President John Williams (voting FOMC member) said it is reasonable to expect another rate increase this year, while Philadelphia Fed President Anna Paulson (voting FOMC member) said that "some modest further tightening may be warranted" if conditions evolve as she expects.

The continued pressure on Treasuries made the recovery in technology and other growth stocks more notable, as those groups rebounded even without meaningful relief from the recent backup in rates. The information technology sector (-0.3%) consequently finished with a relatively modest loss after being down more than 1.0% earlier, while the PHLX Semiconductor Index (-0.3%) staged a similarly sharp recovery. Oracle (ORCL 139.52, -5.04, -3.48%) remained a notable laggard after Bloomberg reported that the company sent a "force majeure" notice to the developer of its New Mexico data center project.

Meta Platforms (META 777.59, +33.49, +4.50%) moved firmly in the opposite direction and provided an outsized boost to the major averages. Shares reached year-to-date highs and extended their gain since the beginning of September to roughly 36%, with the rally accelerating following the launch of Muse. The early reception to the AI agent has given investors a clearer path toward monetizing META's substantial AI investments, helping propel the communication services sector (+1.9%) to the top of the standings.

The health care sector (+0.7%) was another standout, supported by continued strength in Moderna (MRNA 194.82, +12.71, +6.98%) and Eli Lilly (LLY 1183.79, +32.80, +2.85%), while the energy sector (+0.4%) finished higher alongside the increase in crude oil. The financials sector ended flat.

Most other areas remained in negative territory despite the recovery in the headline averages. The materials (-1.0%), utilities (-1.0%), and consumer staples (-1.0%) sectors recorded the widest losses, followed by the industrials sector (-0.7%) and real estate sector (-0.4%). That weakness was reflected in market breadth, with decliners outpacing advancers by nearly 2-to-1 on the NYSE and roughly 3-to-2 on the Nasdaq late in the session.

There were also several pronounced stock-specific moves. Everpure (P 121.83, +12.18, +11.11%) surged to record highs following a bullish Analyst Day, while MGM Resorts (MGM 33.68, -4.17, -11.02%) was among the S&P 500's weakest performers after confirming that People Incorporated (PPLI 35.93, -0.04, -0.11%) withdrew its acquisition proposal.

Thursday's session ultimately looked considerably different at the close than it did near the morning lows. The retreat in oil from above $96 per barrel helped alleviate one of the market's primary early pressures, allowing technology, semiconductors, and mega-cap stocks to recover much of their early weakness despite Treasury yields remaining elevated. That helped the S&P 500 and Nasdaq erase their losses, although negative breadth and declines across most sectors pointed to a weaker underlying session than their flat finishes suggested.

U.S. Treasuries tried to recover from yesterday's sell-off, but that effort ultimately failed, even as reports suggested the U.S. and Iran are exploring discussions about a phased reopening of the Strait of Hormuz.  Like yesterday's 5-year note auction, today's $44 billion 7-year note auction saw some relatively soft dollar demand and foreign interest. Renewed selling hit the market after the results were released at 1:00 p.m. ET and left most securities at, or near, their highs for the session at the cash close. The 2-year note yield setteld up two basis points to 4.91%, and the 10-year note yield settled up seven basis points to 5.18%.