U.S. stocks ended a volatile week on a mixed note Friday as rising oil prices and Treasury yields continued to weigh on risk appetite. All three major indexes and every sector traded lower at one point during the session, but technology, industrial, consumer discretionary and financial stocks turned higher before the close.
The Nasdaq Composite finished up 0.4% at 26,522. The S&P 500 rose 0.2% to 7,650, while the Dow Jones Industrial Average slipped 0.2% to 51,682, extending its losing streak to a third consecutive week.
Markets are still absorbing the Federal Reserve's 25-basis-point rate hike after its September meeting. It was the central bank's first rate increase since 2023, leaving investors focused on inflation, borrowing costs and the likely path of monetary policy.
Oil and Treasury yields remain key market drivers
Matt Maley, chief market strategist at Miller Tabak, said fundamental conditions had not changed enough to convince investors that oil prices would fall sharply or that medium-term yields would decline substantially. Energy prices and bond yields therefore remain important variables in equity valuations.
The front-month West Texas Intermediate crude contract opened at $101.96 a barrel, reached an intraday high of $98.01 and ultimately fell 1.6% to settle at $95.68. Crude remains at an elevated level, raising concerns that energy costs could prolong inflationary pressure and limit room for a shift in monetary policy.
Treasury yields rose across the curve. The 10-year yield climbed 5.9 basis points to close at 5.006%, moving back above 5%. The two-year yield rose 7.0 basis points to 4.760%, while the 30-year yield increased 3.7 basis points to 5.333%.
Higher yields raise financing costs for companies and consumers and can put pressure on equity valuations, particularly among growth stocks that are more sensitive to interest rates.
CME FedWatch data showed that markets were pricing in a 55.4% probability of another 25-basis-point rate increase after the Federal Open Market Committee's October 28-29 meeting. Before that meeting, investors will be watching inflation data, labor-market conditions and the effect of oil prices on the Fed's policy assessment.
Wells Fargo downgrade sends Netflix lower
Netflix (NFLX) was among the weakest-performing S&P 500 constituents on Friday, falling 4.7%. Wells Fargo analyst Steven Cahall downgraded the streaming company from “Equal Weight” to “Underweight” and cut his 12-month price target from $80 to $57.
Netflix carried out a 10-for-1 stock split last November. Cahall's new target implied that the shares could still fall by about 25% from Wednesday's closing price. He said recent trends in user engagement were concerning and argued that Netflix lacked an original series with broad cultural impact. In his view, those issues were beginning to show up in business performance and market expectations.
Cahall said Netflix would need to produce a breakout hit with clear market reach to improve the stock's performance. He also compared Netflix with Walt Disney, whose results in content creation have recently been more visible and whose business has a stronger content-driven profile.
The analyst said Netflix's management faced several options, including higher capital spending, greater investment in original programming or additional acquisitions using the company's balance sheet. Netflix previously lost its bid for Warner Bros. Discovery to Paramount Skydance, putting further attention on how the streaming company will add to its content assets.
Walt Disney shares fell 2.6% on Friday. Warner Bros. Discovery declined 1.6%, while Paramount Skydance dropped 3.9%.
Berkshire sets out Buffett succession roles
Berkshire Hathaway (BRK.B) shares recovered after trading lower earlier in the session and finished up 0.1% Friday. The company provided further details on its governance arrangements following Warren Buffett's planned departure as chairman.
After the transition is completed, Buffett will become chairman emeritus and remain on Berkshire's board. In a letter to shareholders, he said the time was right to complete the leadership transition.
The process began in January, when Greg Abel became chief executive officer. Abel was designated as Buffett's successor in 2021 and first appeared alongside Buffett and Charlie Munger at Berkshire's annual shareholder meeting in 2022.
Buffett remains Berkshire's largest shareholder, with a stake valued at about $145 billion. He said Abel had been handling the company's most important decisions for a considerable period and that he no longer needed to revisit those decisions repeatedly.
Buffett's son, Howard Buffett, will become chairman. Howard Buffett has served as a Berkshire director for 33 years. In his letter, Warren Buffett drew a distinction between their roles: Greg Abel will run the company, while Howard Buffett will be responsible for preserving its culture and values.
For investors, the handover leaves Berkshire's capital allocation, investment discipline and governance style as key areas to monitor as the new leadership structure takes effect.