U.S. equities closed higher Friday, allowing major indexes to finish a volatile week in positive territory despite a sharp rise in Treasury yields. The session highlighted a growing tension for investors: stocks have continued to absorb higher borrowing costs, but persistent increases in long-term yields could eventually create a larger challenge for equity valuations.

Stocks Finish the Week Higher

The Dow Jones Industrial Average advanced 478.64 points, or 0.93%, to 51,828.62. The S&P 500 gained 0.51% to 7,743.41, while the Nasdaq Composite rose 0.5% to 27,068.72.

For the full week, the Dow climbed 0.3%, the S&P 500 added 1.2%, and the Nasdaq increased 2%. Technology provided an important source of momentum, with the S&P 500 information technology sector rising 3.1%, its strongest performance among the index’s sectors.

Technology Remains a Key Source of Momentum

Meta Platforms was among the notable weekly performers, gaining nearly 13% as investors focused on the company’s artificial intelligence agent Muse. Akamai Technologies also advanced about 3% Friday after announcing a multiyear agreement with Anthropic, adding another AI-related catalyst to the technology sector.

The performance suggests that enthusiasm surrounding artificial intelligence continues to provide support for equities even as higher interest rates create pressure elsewhere in the market. For investors, the contrast between strong technology momentum and rising discount rates remains an important feature of the current environment.

Treasury Yields Raise the Stakes

The bond market remained the central source of concern. The 10-year Treasury yield climbed to its highest level since 2007, while the 30-year yield reached its highest level since 2004. The yields were last seen around 5.163% and 5.488%, respectively.

Several factors contributed to the move, including hawkish comments from Federal Reserve Governor Michael Barr, elevated energy prices linked to the Iran conflict, and stronger-than-expected purchasing managers’ data. Fed funds futures were indicating roughly a 64% probability of an October rate increase.

Oil Retreat Offers Some Relief

Crude prices moved lower Friday as hopes emerged for a potential diplomatic path that could eventually reopen the Strait of Hormuz. West Texas Intermediate crude fell 2.33% to $92.41 a barrel, while Brent declined 2.14% to $104.32.

A sustained decline in oil prices could reduce some inflation pressure and potentially ease concerns about the impact of energy costs on monetary policy. However, geopolitical developments remain an important variable for both energy markets and inflation expectations.

Resilience Meets a Higher-Rate Test

Market resilience remains notable, with the S&P 500 and Nasdaq still roughly 1% below their recent highs despite the rise in yields. At the same time, investor sentiment has weakened as borrowing costs have increased, raising questions about how long equities can continue absorbing higher rates without a more significant valuation adjustment.

Attention now turns toward U.S.-China trade developments, with additional details on negotiations expected after President Xi Jinping’s visit to the United States. The two countries have also agreed to extend their trade truce by two months, according to Treasury Secretary Scott Bessent.

What Investors May Watch Next

The interaction between Treasury yields, oil prices, Federal Reserve expectations and technology leadership is likely to remain central to market direction. If yields continue climbing, the pressure on equity valuations could become more pronounced, while falling energy prices or clearer trade developments could provide an offsetting source of support. Investors may therefore be watching whether stocks can maintain their resilience as financial conditions become increasingly demanding.