Key Takeaways:
Wall Street closed a second consecutive losing week Friday, with the S&P 500 barely holding positive ground as rising oil prices, a new round of tariffs and deepening doubts about artificial intelligence spending converged on equities.
The S&P 500 rose 3.68 points, or less than 0.1%, to 7,411.98, its second straight losing week for the first time since March, as a three-front pressure campaign weighed on risk appetite.
"If escalation continues and the Strait of Hormuz remains closed, the impact will land on an energy market with far less resilience than in the spring," Theodore Bunzel, head of geopolitical advisory at Lazard Asset Management, said in a report.
The Dow Jones Industrial Average added 235.60 points, or 0.5%, to 51,947.25, while the Nasdaq Composite fell 161.87 points, or 0.6%, to 24,975.82, dragged lower by a 7% drop in Micron Technology and a 2.7% decline in Broadcom. Brent crude retreated 3.9% to $96.78 a barrel after briefly topping $100 on Thursday, while the 10-year Treasury yield eased to 4.68% from 4.71%.
The losing week sets up the busiest stretch of the earnings season, with investors already questioning whether heavy AI spending by companies like Alphabet and Nvidia will translate into profits. The Federal Reserve meets later this month, and CME FedWatch data shows a 38% probability of a rate hike — a scenario that would compound pressure on stretched equity valuations.
The week's losses were broad but uneven. More stocks rose than fell within the S&P 500 on Friday, yet the technology-heavy Nasdaq lagged sharply as semiconductor stocks extended their slide. Micron Technology fell 7% and Broadcom dropped 2.7%, their large market values dragging on the broader index despite positive breadth elsewhere. The technology sector's underperformance reflects a broader reappraisal of AI-linked valuations, with the so-called Magnificent Seven losing approximately $800 billion in market capitalization during the prior session alone.
Energy costs remain the dominant macro variable. Brent crude has risen from around $72 a barrel before the Iran conflict began in late February to trade above $96, with the Strait of Hormuz disruption threatening global supply. European natural gas surged to its highest since early 2023, with Amsterdam's TTF exceeding 64 euros per megawatt-hour. Nationally, a gallon of gasoline costs $4.10, according to AAA — almost a dollar higher than a year ago. Higher energy prices threaten to squeeze household budgets and shift spending toward necessities, a dynamic that typically pressures consumer-facing equities.
The Trump administration added another layer of uncertainty with a fresh round of tariffs on dozens of nations, impacting nearly all U.S. imports. The tariffs, paid by importing companies that typically pass costs to consumers, arrived just as stopgap levies were set to expire following a Supreme Court defeat. The combination of rising energy prices and new tariffs risks reigniting inflation, which has already dashed hopes for an interest rate cut earlier this year.
European markets recovered Friday after a heavy selloff the prior session, with Milan rising 0.94%, Frankfurt gaining 1.25% and Paris adding 0.69%, supported by a pullback in oil prices and a rebound in banking stocks. Asian markets closed lower. The euro traded at $1.137, while gold slipped 0.8% to $4,060 an ounce.
The busiest week of earnings season begins Monday, with results from across the S&P 500 set to test whether corporate profits can justify current valuations. American Express fell 4.3% on Friday despite reporting a jump in profit, after maintaining its full-year forecast and signaling higher spending to retain wealthy customers — a cautionary signal for the consumer sector. Tesla shares closed at $319.69, down 14.5% on the day and 28.9% year to date, after the company reported a 56.9% year-over-year collapse in operating income and negative free cash flow.
This article is for informational purposes only and does not constitute investment advice.
