Stocks Rise on Hopes for Iran Diplomacy, Crude Oil Prices Fall

Stocks closed higher on Friday amid a drop in crude oil prices following hopes for diplomacy to end the US-Iran war and reopen the Strait of Hormuz. The S&P 500 Index SPY rose by +0.51%, while the Dow Jones Industrial Average DIA gained +0.93% and the Nasdaq 100 Index QQQ increased by +0.42%. The slide in crude oil prices, which tumbled over -2% on Friday, eased inflation expectations and sparked some short covering.

Chipmakers and AI stocks also rallied on Friday, with Microchip Technology MCHP leading gainers in the Nasdaq 100 after closing up more than +5%. Other notable gains included NXP Semiconductors NV NXPI and Qualcomm QCOM, which both rose by over +3%, as well as Analog Devices ADI, Applied Materials AMAT, Lam Research LRCX, and Texas Instruments TXN, all of which closed up more than +2%.

The US economic news was better than expected on Friday, with August nondefense ex-aircraft capital goods new orders rising by +1.6% month-over-month (m/m), beating expectations of +0.6% m/m. The University of Michigan's September consumer sentiment index was also revised upward to 48.1, stronger than anticipated.

However, the gains in stock indexes were limited on Friday after the 10-year T-note yield climbed to a new 19-year high of 5.23%. New York Fed President John Williams emphasized that the Fed needs to return inflation to target and cannot ignore supply shocks if they persistently affect prices.