The major averages finished mostly lower for the week as persistent pressure from elevated Treasury yields weighed on much of the market, while continued strength in semiconductor and other technology stocks provided an important offset. The S&P 500 slipped 0.3% and the DJIA fell 1.3%, while the Nasdaq Composite gained 0.5%. The Russell 2000 declined 0.2%, while the S&P Mid Cap 400 gained 0.5%.
Interest rates remained one of the market's most significant headwinds throughout the week. The 10-year note yield climbed 10 basis points to 5.28%, reaching its highest levels of the year even as expectations for another rate hike at the October FOMC meeting declined. Yields remained elevated early in the week before easing somewhat following dovish commentary from New York Fed President John Williams, who said there was "no need for urgency" following the Fed's September rate hike.
The rate outlook received another shift Wednesday, increasing expectations that the Fed will leave rates unchanged in October. That view received additional support Thursday as Fed Vice Chair Phillip Jefferson emphasized a patient, data-dependent approach, before Friday's September Employment Situation report showed just 29,000 new nonfarm payrolls and a slight increase in the unemployment rate to 4.2%. Despite those developments, longer-term Treasury yields remained elevated, leaving rates an important constraint on equities.
Technology stocks once again proved comparatively resistant to that pressure. The information technology sector gained 1.4%, helping the Nasdaq finish as the only major average with a weekly gain.
That leadership continued to mask weaker performance beneath the surface. The S&P 500 Equal Weighted Index fell 0.7%, compared with the 0.3% decline in the cap-weighted S&P 500, while eight of the 11 S&P 500 sectors finished lower. The health care (-2.7%) and financials (-2.5%) sectors were the weakest performers, while the consumer staples (-1.9%), real estate (-1.9%), communication services (-1.6%), and materials (-1.6%) sectors also recorded sizable declines.
Crude oil was another source of volatility as negotiations surrounding the U.S.-Iran conflict and the Strait of Hormuz remained in focus. WTI moved sharply in both directions during the week before finishing down roughly 1.5%. A coordinated G7 release of 100 million barrels through the IEA contributed to Friday's decline, although the energy sector still gained 1.4% for the week.
Friday provided a more encouraging finish after the softer employment report and lower crude oil helped all 11 S&P 500 sectors avoid losses. Small- and mid-cap stocks also outperformed the S&P 500 during the session, representing an improvement from the narrow participation seen through much of September. Still, the Equal-Weight S&P 500 trailed the cap-weighted index again on Friday, reinforcing the continued outsized influence of technology and the market's largest stocks.
Overall, the week extended the market's recent pattern of concentrated leadership. Semiconductor strength kept the Nasdaq higher and limited the S&P 500's decline, but weakness across most sectors and the Equal-Weight S&P 500 pointed to a softer underlying market. Cooler inflation and employment data reduced expectations for another near-term Fed rate hike, but the continued rise in longer-term Treasury yields prevented that shift from translating into broader relief for equities.
S&P Mid Cap 400: +0.5% week-to-date
Nasdaq Composite: +0.5% week-to-date
Russell 2000: -0.2% week-to-date
S&P 500: -0.3% week-to-date
DJIA: -1.3% week-to-date