Dow closes 500 pts higher as Wall Street rebounds from Treasury yield-driven sell-off

The Dow Jones Industrial Average rose nearly 1% on Friday as US stocks recovered from a sharp sell-off in the previous session, while investors continued to monitor elevated Treasury yields, oil prices and tensions in the Middle East.

The S&P 500 and Nasdaq Composite also gained, although all three major indexes ended the week lower after breaking their recent winning streaks.

Dow leads Wall Street rebound

The Dow rose 517.80 points, or 0.98%, to close at 53,277.01. The S&P 500 gained 0.43% to 7,674.37, while the Nasdaq Composite advanced 0.43% to 26,180.45.

Healthcare stocks including Merck and Johnson & Johnson supported the Dow, while financials and materials also helped lift the broader market. The materials sector was the S&P 500's best-performing sector on Friday, while utilities lagged.

Crypto-related stocks also rallied as Bitcoin extended its weekly gains. Robinhood shares jumped nearly 14%, while Coinbase gained 8%.

Despite Friday's gains, the major indexes posted weekly losses.

The S&P 500 fell 1.4% for the week, ending a three-week winning streak. The Nasdaq declined 2%, also snapping a three-week run of weekly gains, while the Dow fell 0.9% for its second consecutive weekly decline.

Treasury yields remain key market driver

Investors continued to closely track movements in the Treasury market after higher yields contributed to Thursday's sell-off.

The 10-year Treasury yield rose more than 3 basis points on Friday to 4.734%, while the 30-year yield also gained more than 3 basis points to 5.273%.

Stocks have recently moved in the opposite direction of Treasury yields, with equities falling when yields rise and gaining when yields decline.

Investors remain concerned that higher oil prices could contribute to inflation and keep borrowing costs elevated.

The US Treasury's recent increase in bond buybacks has helped ease some pressure in the market.

Treasury Secretary Scott Bessent has also indicated that the government could increase the size of its buyback operations further.

Friday's economic data provided some support for equities. The US services sector recorded its strongest growth in nearly two years in August, driving a sharp acceleration in overall business activity.

That strength offset slower manufacturing growth, which was affected by reduced stockpiling and supply disruptions linked to the Iran war.

Meanwhile, UBS Global Wealth Management raised its year-end target for the S&P 500 to 8,100, citing stronger earnings expectations and robust corporate profit growth.

Oil, Fed outlook and earnings in focus

Rising oil prices remain another source of concern for investors. Brent crude gained 6.39% over the week, while US crude rose 5.66%, after oil prices climbed for a sixth consecutive session.

Higher energy prices could add to inflationary pressure at a time when investors are assessing the Federal Reserve's next policy moves.

Attention will turn to Federal Reserve Chair Kevin Warsh's speech at the Jackson Hole Economic Policy Symposium next week. Investors are looking for greater clarity on interest rates and central bank policy.

The coming week will also bring quarterly results from Nvidia, Intuit, Salesforce and CrowdStrike.

Investors will additionally receive July's Personal Consumption Expenditures price index, the Fed's preferred inflation measure, which could influence expectations for monetary policy.