Stocks Rebound as Oil Retreats and Tech Strength Overcomes Rate-Hike Fears

The major averages snapped a four-session losing streak on Friday, ending the holiday-shortened week with a broad rebound as lower crude oil prices and renewed strength in technology stocks outweighed rising expectations for a Federal Reserve rate hike next week. The S&P 500 gained 0.9%, while the Nasdaq Composite and Dow Jones Industrial Average each advanced 1.0%. The Russell 2000 rose 0.5%, and the S&P MidCap 400 added 0.8%. Despite Friday’s recovery, the major averages still finished firmly lower for the week.

A pullback in crude oil provided some relief from one of the market’s biggest headwinds over the past several sessions. WTI futures settled $2.31 lower, or 2.3%, at $100.08 per barrel, trimming their gain for the holiday-shortened week to roughly 10%.

The decline followed reports that Gulf states will meet with Iran on Monday to discuss the Strait of Hormuz, providing investors with some optimism that diplomatic efforts could reduce tensions after crude surged above $102 per barrel on Thursday. Even with Friday’s retreat, however, oil remained near the psychologically important $100 level following a dramatic week of geopolitical-driven volatility.

Perhaps more notable was the equity market’s ability to rally despite an August Consumer Price Index report that further strengthened expectations for tighter monetary policy. Headline CPI increased 0.4% month over month, matching the Briefing.com consensus, while core CPI rose a slightly hotter-than-expected 0.3%, compared with expectations for a 0.2% increase.

The inflation data produced another substantial shift in expectations for next week’s FOMC meeting. The CME FedWatch Tool placed the probability of a 25-basis-point rate hike on Wednesday at 86.5%, up from 69.4% immediately before the CPI report.

Rather than succumbing to the increasingly hawkish rate outlook, investors focused on the relief provided by lower oil prices and renewed strength across growth stocks. Technology-related areas supplied much of Friday’s leadership, with communication services (+1.4%) and information technology (+1.1%) ranking among the better-performing S&P 500 sectors.

Alphabet (GOOG 335.45, +5.06, +1.53%) and Apple (AAPL 332.27, +5.70, +1.75%) both advanced, while the Vanguard Mega Cap Growth ETF gained 0.9%, signaling renewed buying interest across the market’s largest growth companies.

Semiconductor stocks also rebounded from Thursday’s sharp decline, lifting the PHLX Semiconductor Index 1.8%. The recovery helped restore some of the relative strength that chip stocks displayed earlier in the week before Thursday’s broad semiconductor selloff.

Oracle (ORCL 150.15, -2.79, -1.82%) provided an important read-through for the broader AI infrastructure trade despite failing to hold its own substantial early gain. Shares initially surged by double digits following the company’s quarterly report before reversing course and finishing lower.

The underlying results nevertheless reinforced expectations for continued heavy investment in artificial intelligence infrastructure. Oracle reported 121% year-over-year growth in cloud infrastructure revenue, disclosed more than $30 billion in new AI-cloud contracts, and maintained its fiscal 2027 capital-spending plans.

Those figures provided a powerful catalyst for companies positioned to benefit from continued data-center expansion. Dell Technologies (DELL 567.14, +60.52, +11.95%) surged nearly 12%, while Hewlett Packard Enterprise (HPE 62.08, +6.86, +12.42%) jumped more than 12%. Other AI infrastructure-related stocks also benefited as investors anticipated sustained demand for servers, networking equipment, storage, and other data-center hardware.

Friday’s advance was not confined to technology. Industrials (+1.1%) and consumer discretionary (+1.1%) also ranked among the stronger sectors, giving the rebound a relatively broad foundation and suggesting that investors were willing to add exposure beyond the mega-cap growth complex.

Defensive groups moved in the opposite direction. Health care slipped 0.1%, while utilities declined 0.3%, leaving both sectors behind as risk appetite improved into the end of the week.

Friday’s rebound ultimately recovered a meaningful portion of the losses accumulated during a difficult four-session stretch, although it was not enough to prevent the major averages from finishing firmly lower for the week. The session nevertheless demonstrated notable resilience, particularly given that the August CPI report pushed the implied probability of another rate increase substantially higher.

For much of the week, surging crude oil, rising Treasury yields, and escalating geopolitical tensions created a challenging combination for equities. On Friday, even a modest reversal in one of those pressures—oil—was enough to encourage renewed buying, particularly in technology and AI infrastructure stocks.

Attention now shifts squarely to Wednesday’s FOMC decision. With markets assigning an 86.5% probability to a 25-basis-point rate hike, the immediate question is increasingly moving beyond whether the Fed raises rates and toward the guidance policymakers provide about the path ahead. After a volatile week dominated by oil, inflation, and shifting rate expectations, the Fed’s message could determine whether Friday’s rebound develops into a more durable recovery or proves to be a temporary interruption in September’s recent weakness.

Our FTinvest 11 model portfolio rallied 2.19% to close at 965.67, extending its recovery for a second consecutive session following Wednesday’s sharp selloff. The portfolio has now recovered part of the losses from its recent plunge, although it remains firmly in correction territory, trading approximately 11.9% below its all-time closing high of 1,096.33 and still below the 1,000 level.

FTinvest 11 is now up approximately +4.04% year-to-date, a notable improvement from just +1.21% following Wednesday’s decline. The two-session rebound has lifted the portfolio approximately 2.8% from its September 9 close of 939.41, providing an encouraging stabilization after the recent period of intense selling pressure. Nevertheless, FTInvest 11 remains more than 10% below its record high, meaning a further recovery will be required before the portfolio can exit correction territory.