The major averages finished higher for the week, supported by a broadening of market leadership that helped offset a sharp retreat in semiconductor and other AI-related stocks. The S&P 500 gained 1.2%, the DJIA advanced 0.9%, and the Nasdaq Composite rose 0.6%. Smaller companies lagged, however, with the Russell 2000 falling 0.9%, while the S&P Mid Cap 400 finished unchanged.
The week began on a strong note, with technology and mega-cap growth stocks helping drive the major averages higher before participation broadened considerably. The Nasdaq Composite reached fresh record highs on Monday and Tuesday, while the S&P 500 established its first record high since August 13 on Tuesday and closed above 7,800 for the first time. Gains across ten of the eleven S&P 500 sectors during both sessions represented a meaningful departure from the narrow leadership that had characterized much of the market's recent action.
That improvement in participation ultimately became one of the week's defining features. The S&P 500 Equal Weighted Index gained 1.6%, outperforming the cap-weighted S&P 500. Nine of the eleven S&P 500 sectors finished higher, with several defensive and economically sensitive areas providing the strongest support. The consumer staples (+4.0%) and utilities (+3.9%) sectors led the standings, while the energy (+3.6%), consumer discretionary (+3.1%), health care (+2.8%), and financials (+2.3%) sectors also posted sizable gains.
The broad strength contrasted sharply with weakness across semiconductor and other AI-related stocks, particularly during the second half of the week. Questions surrounding the revenue growth supporting the AI infrastructure buildout intensified Thursday following a Financial Times report concerning OpenAI's annualized revenue, prompting a pronounced retreat across chipmakers and related names. The information technology sector slipped 0.3%.
Treasury yields remained elevated but provided some relief as the week progressed. The 10-year note yield briefly climbed to 5.36% on Wednesday, reaching a fresh high for the year before strong demand at Treasury auctions and a subsequent retreat in crude oil helped reverse some of the pressure. The 10-year yield ultimately finished four basis points lower for the week at 5.24%, while the 2-year yield declined three basis points to 4.79%. The pullback offered some support for rate-sensitive areas, although the Russell 2000's weekly decline demonstrated that smaller companies continued to face headwinds.
Crude oil was another source of volatility as developments surrounding the U.S.-Iran conflict and the Strait of Hormuz continued to influence prices. WTI declined early in the week amid improving Middle Eastern export flows before surging Thursday as reports of renewed attacks on tankers raised concerns about supply disruptions. Prices subsequently retreated from their intraday highs following comments from President Trump indicating that the U.S. was engaged in productive discussions with Iran and would not launch additional strikes before the November elections. WTI ultimately finished the week just under $1 per barrel higher, helping the energy sector post one of the week's strongest gains.
Friday's advance provided a favorable conclusion to the week, with nine S&P 500 sectors finishing higher and both small- and mid-cap stocks participating despite continued semiconductor weakness. Company-specific developments also played an important role, particularly in the real estate sector, where communications tower operators rallied on expectations for increased demand tied to SpaceX's expansion into terrestrial wireless services.
Overall, the week marked a notable shift away from the market's recent dependence on semiconductor and mega-cap technology leadership. The S&P 500 and DJIA posted solid gains, while the Equal-Weight S&P 500 outperformed its cap-weighted counterpart. Although small-cap stocks remained under pressure and questions surrounding AI-related spending weighed on technology, stronger participation across most sectors left the broader market in better shape heading into the upcoming earnings season.
S&P 500: +1.2% week-to-date
DJIA: +0.9% week-to-date
Nasdaq Composite: +0.6% week-to-date
S&P Mid Cap 400: UNCH
Russell 2000: -0.9% week-to-date