Brent crude rose +3.1% on Friday to settle at $116.72 a barrel, its highest close since April 29, as traders priced in the risk that the U.S. and Israel will resume strikes on Iran after the midterm elections. The Dow Jones Industrial Average fell −1.23%, the S&P 500 lost −0.52%, and the Nasdaq Composite slipped −0.21%.

The selling landed on a different part of the market than on Thursday. Chipmakers and cybersecurity stocks rose, while consumer staples, banks and industrials, the groups that had held up during Thursday’s AI rout, led the declines. Only 135 of the 503 stocks in the S&P 500 finished higher.

Index Performance

Cross-Asset Snapshot

Oil Sets the Tone for a Broad Decline

The S&P 500 closed at 7,623.68 and the Dow at 52,215.16, down 652.82 points. The Nasdaq Composite ended at 25,955.34, and the Nasdaq 100 finished flat, down 1.16 points at 28,957.53. The Russell 2000 lost −0.29%.

The day had two halves. The indexes opened lower, and the Dow was down as much as −1.44% around 10:20 a.m. A rebound in chip stocks then lifted the Nasdaq 100 to a gain of +0.58% shortly before noon. That rally faded through the afternoon as oil held its gains, and the Nasdaq 100 gave back all of it by the close.

The average stock did worse than the index. The median S&P 500 member fell −0.85%, and the equal-weighted average was −0.78%, against −0.58% for the market-cap-weighted calculation from the same daily map. Energy was the only sector with broad gains: 18 of its 21 members rose and the Energy Select Sector SPDR (XLE) gained +2.6%. The Consumer Staples Select Sector SPDR (XLP) fell −1.92%, the worst of the eleven sector funds, and only 4 of 34 staples stocks closed higher. Consumer discretionary, communication services, financials and industrials each lost more than 1%.

Technology was the second-best sector. The Technology Select Sector SPDR (XLK) rose +0.49%, as Microsoft, Micron and the cybersecurity group offset declines in Nvidia and Broadcom.

Thursday’s Winners Become Friday’s Losers

Thursday’s session, covered in yesterday’s recap, was a flight out of AI stocks into nearly everything else. Two-thirds of the S&P 500 rose even as the index fell. Friday ran the other way. The 336 stocks that gained on Thursday fell an average of −1.07% on Friday, while the 166 that declined on Thursday slipped only −0.21%. Across the index, the correlation between the two days’ moves was −0.18.

A longer view shows the same reversal. Sorting the S&P 500 into fifths by performance in the week to October 16, the best fifth (up an average of 7.0% that week) gained +3.1% on Thursday, with 89% of its members rising. On Friday that group fell −1.27%, and only 19% of its stocks closed higher. The worst fifth, which had lost 10.4% in the week to October 16 and another −4.2% on Thursday, fell just −0.26% on Friday, and 43% of its members rose. On Thursday, a stock’s move tracked its performance the previous week, with a correlation of +0.70. On Friday the relationship turned slightly negative.

The reversal makes sense once oil is in the picture. The rotation of the past two weeks has favored staples, health care and other defensive groups as a hiding place from AI risk. Those companies are not a hiding place from an oil shock. Staples makers pay for fuel, freight and packaging, and their customers lose spending power when gasoline rises. The national average price of gasoline reached $4.29 a gallon on Friday, 40% higher than a year earlier, according to AAA data cited by The Wall Street Journal.

Analysts at Wells Fargo made the same point about discount retailers. With third-quarter diesel prices up about 60% from a year earlier, they estimated that fuel costs would widen the hit to operating margins to about 27 basis points from 18 basis points in the second quarter, CNBC reported. Dollar General fell −4.6% and Dollar Tree −4.4%. Coca-Cola and Procter & Gamble each dropped −2.8%, and Colgate-Palmolive lost −3.4%, after all of them rose sharply on Thursday.

Rates added to the pressure. The 10-year Treasury yield rose 3.5 basis points to about 4.99%, recovering part of Thursday’s drop, the largest one-day decline in roughly three and a half years. Banks and insurers, which had rallied on that decline, gave the gains back. The Financial Select Sector SPDR (XLF) fell −1.32%, and MetLife lost −4.6%.

Brent Crude Climbs on Fears of Renewed Strikes

December Brent rose +3.1% to settle at $116.72, and December West Texas Intermediate gained +3.8% to $103.27, according to CNBC. Brent gained +6.2% for the week, its third straight weekly advance, and WTI rose about 2%.

The rally rests on expectations of a new round of fighting. U.S. officials told The New York Times this week that the U.S. and Israel have plans for fresh strikes on Iran after the midterm elections, and President Trump said Wednesday that the U.S. was not negotiating with Iran. Iran-allied Houthi militants have kept up attacks on Saudi Arabia, including a drone strike on the Shaybah oil field, and the State Department ordered non-essential personnel to leave the country. The U.S. is sending additional forces to the region, and Iran has warned that it would strike civilian targets in neighboring countries if the air campaign restarts, the Journal reported.

Oil producers and service companies led the S&P 500. SLB rose +7.1% after its quarterly results, Halliburton gained +5.2% and Baker Hughes +4.2%. ConocoPhillips added +3.6%, Chevron +2.9% and Exxon Mobil +2.8%, and all three traded at all-time highs during the session, according to CNBC.

SLB’s third-quarter revenue rose 6% from a year earlier to $9.45 billion, and adjusted earnings of 64 cents a share topped estimates, Investing.com reported. Middle East revenue rose 13% from the second quarter. Management guided to fourth-quarter revenue of about $10 billion and said its data center business, which supplies power and cooling equipment, grew 76% from a year earlier to $230 million and should pass $2 billion in revenue in 2027, according to Benzinga. The company also said the pace of recovery in the Middle East remains uncertain.

The rest of the energy complex split. U.S. natural gas fell −6.1% to $2.63, while European gas prices climbed to levels last seen in 2022 as the region’s storage sits about 75% full heading into winter, the Journal reported. Uranium, nuclear and clean energy funds fell to 52-week lows, CNBC noted, an unusual split on a day when energy security was the main theme.

Hotter Prices, Sour Consumers

The morning’s data showed an economy that is still growing quickly and prices that are still rising. S&P Global’s flash composite PMI slipped to 57.6 in October from 58.4, with services at 57.9 and manufacturing at 56.0, a 53-month high. Selling prices rose at the fastest pace since August 2022, and input costs, aside from last month’s spike, climbed at the fastest rate since November 2022. Chris Williamson, chief business economist at S&P Global Market Intelligence, said the survey readings are consistent with GDP growing at a 5% annualized rate.

Households feel worse about it. The University of Michigan’s final consumer sentiment index for October was 48.0, down from 48.1 in September and the second-lowest reading in the survey’s history, according to the Journal. Before this year, the lowest October reading ahead of a presidential or midterm election was 57.6 in 2008, the Journal noted. Only May’s 44.8 has been lower in the survey’s monthly history.

One-year inflation expectations rose to 4.7% and longer-run expectations to 3.5%, each up 0.1 percentage point, according to the University of Michigan’s survey data. The one-year measure is back near its spring levels, and the long-run gauge is the highest since May.

Fast growth, rising selling prices and climbing inflation expectations make a hard combination for the Fed — the kind that keeps a December hike on the table. Odds of a hike at the October 27-28 meeting edged up to 8% from 6% on Thursday, based on fed funds futures. The probability of at least one hike by the December 9 decision held at about 82%, down from 95% earlier in the week, before Thursday’s flight to Treasurys.

Gold did not benefit from the war risk. December gold fell −1.24% to about $4,010 an ounce and lost −4.1% for the week. With the 10-year yield back near 5% and a December hike still the market’s base case, the cost of holding a metal that pays no interest has gone up. Newmont fell −4.6% after reporting third-quarter free cash flow of $1.9 billion, down 13% from the second quarter, and saying unit costs will rise in the fourth quarter and trend higher in 2027, according to its release.

Moody’s Spares France

After the close, Moody’s kept France’s credit rating at Aa3 with a negative outlook, while most analysts had expected a downgrade to A1, Reuters reported. The agency said the rating assumes that a deficit-cutting budget for 2027 will pass and that financing costs and social tensions will ease somewhat in the coming months. France expects a deficit of 5.4% of GDP this year and targets 5.0% in 2027, with public debt heading toward 121.7% of GDP.

The decision matters for Treasurys as well as for French bonds. France’s 10-year yield crossed 5% on Wednesday for the first time since 2002, and the spread over German debt widened past 160 basis points on Thursday, as covered in Thursday’s recap. The intraday timing of Thursday’s Treasury rally points to Europe as one of its drivers. The 10-year yield fell about 19 basis points on the day, from 5.146% to 4.953% at 3 p.m. Based on 10-year note futures, roughly 6 basis points of that decline came between Wednesday afternoon and 3 a.m. Thursday, while Nasdaq 100 futures were sliding on Meta’s results. About another 4 basis points came between 3 a.m. and the 9:30 a.m. open, during European trading. Over those hours the euro fell about 0.4% against the dollar while Nasdaq 100 futures were roughly flat, so the bond buying was not coming from a stock selloff. The remaining 10 basis points or so came during U.S. hours, alongside the rout in tech.

The pattern fits money leaving French bonds for German and U.S. debt ahead of a feared downgrade, though the data can’t prove the motive. If the safety bid was partly about France, the decision to hold the rating takes away some of the support for Treasurys when trading resumes on Monday, at a time when oil is already pushing yields up.

SpaceX Moves Toward the Wireless Market

AT&T fell −8.0% and T-Mobile −7.7% after Bloomberg reported on Thursday that SpaceX is in talks to gain access to at least 80,000 cell sites across the U.S., including with Crown Castle, as part of its push to become a wireless carrier. The report cited people familiar with the matter. No deal has been announced. Verizon fell a smaller −1.2%.

The two stocks lost about $28 billion of market value combined. Tower owners rose on the prospect of a new tenant: Crown Castle gained +9.1%, American Tower +4.1% and SBA Communications +3.6%. SpaceX shares rose +1.9%, and PhillipCapital upgraded the stock to buy from sell with a $250 price target, citing faster growth in its AI computing business, CNBC reported.

The threat is not new. AT&T dropped more than 6% on Wednesday after its earnings, as covered in Wednesday’s recap, when investors weighed slowing subscriber growth against SpaceX’s plans. Leasing tower space would let SpaceX offer ground-based service alongside its satellites without building its own network, which is the part of the business the incumbents had considered their moat. Verizon reports on Monday and T-Mobile on Wednesday, and both will be asked about pricing and subscriber losses.

Chips Bounce, but the AI Funding Strain Stays

The Philadelphia Semiconductor Index rose +0.44% to 10,779.46, recovering only a sliver of Thursday’s −6.72% fall. Memory and smaller chipmakers led. Micron gained +2.5%, Marvell +2.3%, AMD +1.7% and Intel +1.7%. The largest names lagged: Nvidia fell −0.59% and Broadcom −0.48%.

Memory stocks took their cue from Seoul. SK Hynix said its U.S. flash-memory subsidiary, Solidigm, will halt its review of a pre-IPO funding round and a U.S. listing, citing recent market conditions and share price trends, and will look at other ways to fund a new U.S. chip plant, according to CNBC. Industry estimates had valued the unit at as much as $150 billion, the Journal reported. SK Hynix shares slid early in Seoul before closing +4.4% higher.

Pulling a listing of that size is a sign of how much the market for AI capital has tightened in two weeks. The bond market showed the same strain on Friday. The extra yield investors demand to hold SpaceX’s 2031 bonds rose to about 2.28 percentage points from 2.05 on Thursday, Oracle’s rose to 2.63 points and Meta’s to 0.75 points, according to MarketAxess data cited by the Journal. All three companies carry investment-grade ratings, yet the SpaceX and Oracle bonds now trade at wider spreads than the 2.06-point average for double-B-rated debt. CoreWeave fell −2.5% after Morgan Stanley cut its price target to $70 from $99, citing financing uncertainty around its plans to deploy contracted capacity, CNBC reported.

The companies that build and power data centers had another bad day. Bloom Energy fell −11.2% even though third-quarter revenue of $1.24 billion and adjusted earnings of 94 cents a share beat estimates and it raised its full-year outlook. Investors focused on negative free cash flow for the quarter, CNBC reported. Comfort Systems USA, the mechanical and electrical contractor, dropped −9.3% after reporting backlog of $17.81 billion, up from $14.06 billion at the end of June and $9.38 billion a year earlier, according to its release. Revenue rose about 54% to $3.77 billion.

Comfort Systems is a clear example of what the market is now discounting. Its backlog nearly doubled in a year, and the stock still fell almost 10%, because that backlog depends on customers who increasingly need outside money to pay for their projects. Western Digital followed the same script, falling −3.0% after earnings and revenue that beat estimates.

The semiconductor index has now reached a level that technical traders watch closely. The SOX touched its 200-day moving average on Thursday for the first time since early June 2025. On Friday it dipped below the average again, to an intraday low of 10,667.92 against a 200-day level near 10,690, before closing above it for a second day. The iShares Semiconductor ETF (SOXX) bottomed at $472.21 on Thursday, within about $1 of its own 200-day average. The index is 26% below its June 22 peak.

How Much of This Is Forced Selling?

The size of the selling in tech has drawn comparisons with past deleveraging episodes. Jefferies’ equity trading desk said the week ended October 16 was its most heavily sell-skewed week in tech in more than five years, with net tech selling of $7.5 billion, more than during the January 2025 DeepSeek selloff, Yahoo Finance reported. The selling was concentrated in semiconductors, memory, hardware and communications equipment, while software and IT services saw net buying, which matches this week’s split between chip stocks and cybersecurity names.

The holdings of Value Aligned Research Advisors, the AI-focused fund at the center of last week’s liquidation rumors covered in the October 16 recap, offer a way to track that kind of selling with public data. The 25 largest positions in its June 30 filing, weighted by the value of its stock and call holdings, have fallen −15.6% since September 30, compared with −12.1% through October 16. The Nasdaq 100 is down −4.8% over the same period and the S&P 500 −0.4%. The worst performers are still the mid-sized infrastructure names the fund held directly: IREN −39.1%, CoreWeave −37.7%, Nebius −32.7% and Seagate −31.6%.

The filing is almost four months old and shows nothing about current positions, and there is still no confirmation that the fund is unwinding. What the basket shows is that the stocks most crowded among AI-focused investors kept falling this week: the basket lost about 3.9% from October 16 to October 23, against −0.79% for the Nasdaq 100. In July, the forced sale of another AI fund’s positions marked the low of that month’s chip rout, as covered in an August recap. If this selloff follows a similar path, the end of the selling, not a change in fundamentals, would set the bottom. No one outside the funds involved can see when that point arrives.

Cybersecurity Stocks Surge

Cybersecurity was the strongest group in the market. CrowdStrike jumped +8.3%, Zscaler +7.3%, Cloudflare +7.3%, Palo Alto Networks +7.2%, Okta +5.8%, Datadog +4.6% and Fortinet +4.1%. CrowdStrike and Palo Alto each gained more than 11% for the week, putting them among the S&P 500’s best performers.

The rally followed a week of disruption from two critical flaws in PHP, the programming language behind roughly 70% of websites. Governments in Britain, Finland and Japan took parts of their websites offline while they patched systems, and the FBI warned the flaws could let attackers run their own code on servers, the Associated Press reported. AI agents helped find the vulnerabilities, and OpenAI said it led a group of researchers that worked on fixes for two months.

The episode strengthens the case for security spending in an AI-heavy world. If AI tools find old bugs faster, defenders and attackers will both find more of them, and companies will need to patch, monitor and replace systems more often. For investors trimming AI hardware exposure, security software offers an AI-linked theme that runs on subscription revenue rather than on borrowed capital.

Around the Market

Microsoft was the only Magnificent Seven stock to rise, gaining +0.66%. Alphabet fell −1.24%, Meta −0.96%, Amazon −0.95%, Tesla −0.63%, Nvidia −0.59% and Apple −0.14%. Alphabet’s two share classes together subtracted about 0.13 percentage point from the S&P 500, the largest drag of any company.

American Express fell −3.7% and was one of the heaviest weights on the Dow. Its third-quarter revenue rose 9% to $20.1 billion, adjusted earnings rose 13% to $4.68 a share, and card member spending grew 8% to $454.0 billion, according to the company. It raised its full-year earnings outlook and booked a $336 million restructuring charge. The company is cutting about 5% of its global workforce, roughly 3,500 jobs, the Journal reported. It joins a run of job-cut announcements this week, including eBay and Barclays.

Deckers Outdoor fell −4.9% after quarterly revenue of $1.43 billion missed the $1.51 billion analysts expected, with sales of its HOKA and UGG brands below forecasts, CNBC reported. Bristol Myers Squibb lost −2.4% after disclosing that a patient in an early-stage multiple sclerosis study of its experimental CAR-T therapy died. Eli Lilly fell −2.5% and subtracted more from the S&P 500 than any company outside big tech.

Overseas, Gucci owner Kering dropped about 17% in Paris after a decline in revenue, and Volvo Car fell more than 20% in Stockholm after China sales fell by nearly half and it announced 2,500 job cuts.

For the week, the S&P 500 fell −0.47%, the Nasdaq Composite −0.71% and the Nasdaq 100 −0.79%. The Dow gained +0.41% and the Russell 2000 +2.00%. Across the S&P 500, 329 stocks rose for the week and 173 fell.

Earnings have been solid but not spectacular. With 24% of S&P 500 companies reporting, 83% have beaten profit estimates, above the five-year average of 78%, but earnings have come in only 2.1% above estimates in aggregate, against a five-year average of 7.5%, according to FactSet. The blended growth rate for the quarter rose to 29.5% from 29.2% a week earlier.

My View: Headlines vs. Dealer Positioning

Friday’s midday drop in December Nasdaq 100 futures (NQ) came from the headlines, not from dealer positioning. The selling started around 12:55 p.m. ET after Reuters, citing two senior security officials, reported that Iran would target undersea cables in the Gulf if attacked again by the U.S. and Israel. NQ fell from 29,257.5 at 12:45 p.m. to 29,145 by 1:25 p.m., right where a QQQ-based GEX king node had formed near 29,146.

From there, the tape read like dealer positioning to me. Futures bounced off that king node to 29,224.5 just before 2 p.m., only to be pushed back down. For the rest of the afternoon, NQ chopped between 29,150 and 29,100 and drifted to an intraday low of 29,101.5 at 3:50 p.m., likely pinned by weekly options expiration. After 10 minutes of sharp swings between 29,140 and 29,100 into the bell, the contract was trading near 29,122 at the 4 p.m. cash close, and then climbed to 29,175 by the 5 p.m. pause as expiration pressure faded.

Heading into next week’s hyperscaler reports and the FOMC meeting, rising oil prices remain a headwind. If crude keeps climbing, even defensive sectors will struggle to hold their ground, just as they gave back Thursday’s gains on Friday and weighed on the S&P 500. For tech, it comes down to the four things I have been watching: free cash flow, how capital spending is funded, how quickly that spending turns into revenue, and positioning into the reports. If those come out positive, NQ should show the stronger move; if not, it will probably correct harder. Either way, the Nasdaq moves more in both directions, so I always approach it more carefully. I am also watching whether dip-buying in semiconductors continues after SOXX touched its long-term moving average on Thursday. Next week will be key for whether that bounce turns into a trend.

The Week Ahead

Next week brings the three largest AI spenders still to report, a Fed decision and the most important inflation data of the month. Schedules compiled by StockTitan show:

• Monday: Verizon before the open. Cadence Design Systems and Nucor after the close.
• Tuesday: Coca-Cola, Boeing, UPS, American Tower and PayPal before the open. Visa, Seagate, Baker Hughes and Teradyne after the close.
• Wednesday: GE Vernova and Vertiv before the open. Oracle holds its investor day at Oracle AI World, with a webcast starting at 10:55 a.m. CT (11:55 a.m. ET), the company said. The Fed announces its decision at the end of the October 27-28 meeting. Alphabet, Microsoft, ServiceNow, T-Mobile, KLA and Fortinet report after the close.
• Thursday: Third-quarter GDP and September personal income and spending, which includes the PCE price index, at 8:30 a.m. ET, according to the BEA. Eli Lilly, Mastercard, Merck, Caterpillar and Quanta Services report before the open. Amazon, Intel, Sandisk and Starbucks follow after the close.
• Friday: Exxon Mobil, Chevron, AbbVie and Colgate-Palmolive before the open.

Microsoft, Alphabet and Amazon will be judged on two questions after Meta’s filing this week: whether cloud revenue is growing fast enough to justify the spending, and how much of that spending they can pay for out of their own cash.

Oracle faces the same questions with less room. In a note on Friday, Goldman Sachs said investors want to hear about returns on capital spending, the durability of demand given Oracle’s customer concentration, and its ability to build data centers despite political pressure, CNBC reported. Goldman laid out Oracle’s funding plan for fiscal 2027: about $20 billion from share sales already completed, $20 billion to $25 billion of customer prepayments, about $20 billion of new debt, and the rest from operating cash flow. With its bonds trading at wider spreads than the average double-B company, the investor day is effectively a pitch to creditors as well as shareholders.

Bottom Line

Oil took over from AI as the market’s main worry on Friday. Brent’s climb to a six-month high pushed yields back toward 5% and hit the consumer and financial stocks that had absorbed Thursday’s rotation out of tech.

That leaves investors with fewer places to hide. AI infrastructure stocks are still being sold over funding concerns, and the defensive groups that replaced them are exposed to fuel costs and higher rates. Energy producers were the only group that benefited from both.

Next week’s reports from Microsoft, Alphabet and Amazon, and the Fed’s decision on Wednesday, will show whether the AI trade can find support before oil and rates do more damage.