Stocks on Wall Street experienced a rise on Friday, with crude oil prices falling for the first time in a week. Despite the day's gains, major indexes were still on track for their second consecutive losing week.
The S&P 500 gained 0.4%, while the Dow Jones Industrial Average climbed 265 points, or 0.5%. The Nasdaq Composite slipped 0.1%, weighed down by significant losses in large-cap technology stocks.
Broader market sentiment this week has been influenced by heightened tensions in the Middle East, stemming from heavy fighting that has threatened the global flow of oil and gas. Analysts noted that the energy market has fewer buffers than in previous periods, with strategic reserves in the U.S. having been diminished.
Brent crude, the international oil benchmark, fell 4.3% to $96.34 per barrel. The commodity had seen a general upward trend throughout the week, briefly surpassing $100 on Thursday. Prior to the current conflict in Iran, which began in late February, Brent crude was trading around $72 per barrel.
Bond yields also eased, providing some relief to the stock market. The yield on the 10-year Treasury note decreased to 4.68% from 4.71% on Thursday.
Adding to market pressures, the U.S. has implemented a fresh round of tariffs impacting nearly all imports. These tariffs are paid by importing companies and are often passed on to consumers, potentially contributing to inflation.
The combination of rising energy prices and new tariffs could lead to increased inflation, which has already been straining consumer budgets and influencing Federal Reserve policy. The Fed is scheduled to meet later this month, and rising inflation has dashed hopes for an interest rate cut, with market participants leaning towards a potential rate hike.
According to CME FedWatch, there is a nearly 36% chance of a rate hike at the upcoming Federal Reserve meeting.
Higher energy costs, with a national average gasoline price of $4.10 per gallon, threaten to reduce household discretionary spending. This is nearly a dollar higher than the previous year.
Investors are also expressing concern about the sustainability of corporate profits. While recent earnings reports have shown growth, concerns are mounting. American Express, for example, saw its stock fall 4.8% despite reporting increased profits and maintaining its annual forecast. The company has been increasing expenditures to retain affluent customers amidst growing competition.
Lingering worries about the profitability of artificial intelligence-focused technology companies also persist. Firms like Alphabet and Nvidia are making substantial investments in AI, and investors are increasingly scrutinizing whether these expenditures will yield profits sufficient to justify their current market valuations.