The major averages finished a volatile week mixed as the Federal Reserve's first rate hike since 2023 and another stretch of elevated Treasury yields kept pressure on much of the market, while strength in technology and other large-cap growth stocks provided an important offset. The S&P 500 slipped 0.1% and the DJIA fell 1.7%, while the Nasdaq Composite gained 0.7%. Small- and mid-cap stocks faced considerably greater pressure, with the Russell 2000 down 1.5% and the S&P Mid Cap 400 falling 1.7%.
Interest rates were a major influence throughout the week, with the 10-year note yield repeatedly testing the 5.00% level ahead of Wednesday's FOMC decision. The Fed delivered the widely expected 25-basis-point rate hike, lifting the target range for the fed funds rate to 3.75-4.00%, but the initial reaction was relatively subdued. Selling accelerated during Fed Chair Kevin Warsh's press conference as his emphasis on persistent inflation and the prospect of additional tightening sent Treasury yields sharply higher and erased an earlier advance in stocks.
Thursday brought a meaningful reversal as Treasury yields retreated and technology stocks returned to the forefront. The S&P 500 gained 1.1% and reclaimed its 50-day moving average, while the Nasdaq surged 1.7% behind broad strength in semiconductors, AI infrastructure stocks, and the Magnificent Seven. That rebound proved particularly important after three consecutive losing sessions and helped the large-cap averages recover much of their earlier weakness.
Technology ultimately provided one of the week's primary sources of support despite considerable volatility. The information technology sector gained 1.1%, and software stocks were even stronger. The communication services sector rose 1.2%.
The strength in large-cap growth contrasted sharply with weakness across much of the rest of the market. The utilities (-3.0%) and real estate (-2.3%) sectors were among the biggest laggards as elevated yields weighed on rate-sensitive stocks, while the materials (-1.9%), consumer discretionary (-1.5%), industrials (-1.5%), and financials (-1.3%) sectors also finished firmly lower. The health care sector (+1.8%) was a notable exception to the broader weakness.
Crude oil remained another source of volatility, briefly climbing above $105 per barrel as developments surrounding the U.S.-Iran conflict remained in focus. Prices subsequently retreated as the week progressed and WTI finished near $100 per barrel, roughly unchanged for the week, limiting its overall impact on weekly sector performance despite pronounced swings during individual sessions.
Overall, the relatively modest move in the S&P 500 masked a much weaker showing beneath the surface. The Fed's rate hike and the continued presence of the 10-year yield near 5.00% weighed heavily on smaller companies and rate-sensitive areas, while technology, software, and mega-cap growth stocks provided enough support to keep the Nasdaq higher and the S&P 500 near its flat line. Thursday's rebound demonstrated the continued influence of AI and large-cap growth leadership, but the week's pronounced performance gap left the broader market considerably weaker heading into next week.
Nasdaq Composite: +0.7% week-to-date
S&P 500: -0.1% week-to-date
Russell 2000: -1.5% week-to-date
DJIA: -1.7% week-to-date
Nasdaq Composite: -1.7% week-to-date