Stocks Edge Up as Oil Slides; Confidence Dip Briefly Knocks Markets Lower

Markets found their footing after an oil-driven turn

Stocks shook off an early wobble tied to weaker consumer confidence. The S&P 500 climbed 0.5% and the Nasdaq 100 gained 0.4%, with most of the advance coming after a report that Iran provided terms to reopen the Strait of Hormuz. A retreat in oil and a slight pullback in the 10-year Treasury yield - after sharp climbs midweek - took some pressure off equities.

Energy, rates, and what flipped the tone

Brent slid 2.1% to $104 after reports that Washington and Tehran are discussing a phased arrangement to reopen the Strait of Hormuz and that the US would lift its blockade of Iranian ports. Yields on the 10-year Treasury eased after their steep jumps on Wednesday and Thursday, easing a key headwind for stocks. "The decline in oil prices has helped the equity market ignore the further rise in long-term rates this week," said Matt Maley, Miller Tabak & Co.'s chief market strategist. He added that the rally remains narrow and warned, "if the 10-year yield holds above 5% as we move into October, the headwinds for stocks will grow stronger. Therefore, investors are going to have to remain very nimble." Sevens Report founder Tom Essaye noted that the downtick in oil and yields after big runups earlier in the week "provides relief for investors."

Data, companies, and policy moves to watch

Consumer sentiment slid to 48.1 in the University of Michigan's final September reading, a four-month low that sparked the morning weakness. August data showed core capital goods orders rose more than expected, while overall durable goods orders were flat, per the Commerce Department. Costco topped quarterly profit estimates, helped by tariff-related tailwinds, though paid memberships increased less than anticipated.

A Reuters report said the Federal Reserve plans to lift the asset thresholds that trigger tougher oversight of big banks, following a punishing stretch that pushed the group into a technical correction. The week's selloff in banks lined up with declines in so-called "consumer inertia" shares after Meta Platforms Inc.'s latest release.

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Tech still sets the pace, but macro remains in charge

Meta's rally this month has it nearing the $2 trillion club. The Nasdaq 100 has outpaced both the equal-weight S&P 500 and the small-cap Russell 2000, exceeding them by over 7 percentage points this month, measured through Thursday's close, according to Bloomberg. "We favor the US as the AI narrative remains strong," wrote a team at Citigroup Global Markets led by Dirk Willer.

"We have capacity to add to equity risk, and emerging Asia is a candidate, but prefer to buy the dip as there is usually some indigestion after first Fed hikes into midterms." Traders have increased wagers on a rate hike at the Fed's October meeting. On Friday, New York Fed President John Williams said the central bank cannot ignore supply shocks if they influence prices.

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