Stocks Finish Mostly Higher as Crude Prices Fall

The S&P 500 Index ($SPX) (SPY) closed up by +0.17% on Friday, the Dow Jones Industrial Average ($DOWI) (DIA) closed down by -0.18%, and the Nasdaq 100 Index ($IUXX) (QQQ) closed up +0.67%. December E-mini S&P futures (ESZ26) rose +0.20%, and December E-mini Nasdaq futures (NQZ26) rose +0.70%.

Stock indexes settled mixed on Friday, with the broader market recovering from early losses as short covering emerged after crude oil prices gave up an early advance and fell more than -1% on hopes that diplomacy could resume crude flows from the Middle East. Stock indexes also found support from strength in chipmakers and AI-infrastructure stocks, along with a rally in cryptocurrency-exposed stocks.

Higher bond yields on Friday initially weighed on stocks as the 10-year T-note yield rose +6 bp to 5.00% on expectations for the Fed to raise interest rates at least one more time this year.

Friday's weaker-than-expected US economic news also weighed on stocks. Aug manufacturing production unexpectedly fell -0.3% m/m, weaker than expectations of +0.3% m/m and the largest decline in 10 months. Also, US Aug leading indicators unexpectedly fell -0,1%, weaker than expectations of a +0.1% increase and the first decline in 5 months.

Kansas City Fed President Jeff Schmid said, "The Fed has work to do on inflation and this week's action was a step in that direction." He added that "higher oil prices have been an important driver of elevated inflation, but it is important to acknowledge that our inflation problem is not just about energy."

Bitcoin (^BTCUSD) rose more than +5% on Friday to a 2-week high after the SEC moved forward with a plan to allow digital versions of securities to start trading in the US.

Stock volatility on Friday was higher than usual due to the quarterly event known as triple witching, when equity options, futures, and derivatives expire. According to Citadel Securities, about $7 trillion of options are set to expire today, one of the largest ever. Index rebalancing may also lead to market turbulence, with Bloom Energy, Illumina, and Everpure added to the S&P 500 after the close, while SpaceX will get a weighting boost from a Nasdaq 100 rebalance.