Wall Street concluded the trading session on Friday with mixed results, taking a pause after experiencing its strongest performance in over a month the day prior. U.S. Treasury yields experienced an uptick once more, exerting pressure on equity markets. Market participants processed a week marked by significant developments, notably the controversy surrounding artificial intelligence safety and the Federal Reserve’s inaugural interest rate increase in more than three years. Friday also marked quadruple witching day, an event that occurs four times annually in March, June, September, and December. Derivative contracts linked to stock index futures, stock index options, stock options, and single stock futures reach expiration on this day, frequently resulting in volatile trading volume. The benchmark S&P 500 inched up 0.1% to close at 7,643.03 points, while the tech-heavy NASDAQ Composite added 0.4% to settle at 26,522.55 points. The blue-chip Dow Jones Industrial Average experienced a decline of 0.2%, closing at 51,680.74 points. For the week, the Nasdaq experienced an increase of 0.7%. Conversely, the S&P and Dow declined by 0.2% and 1.7%, respectively.

September has thus far adhered to its historical pattern of presenting challenges for Wall Street, as evidenced by the S&P’s decline of nearly 1%. Sentiment leading up to Wednesday’s Fed decision was dampened by an increase in rate hike expectations, driven by rising oil prices, U.S. economic indicators, and a persistent decline in the bond market. With traders pricing in a 90% chance of a quarter-rate hike, the Federal Open Market Committee on Wednesday did not disappoint, unanimously voting to raise the federal funds rate to 3.75%-4.00% from 3.50%-3.75%. Moreover, the central bank’s updated Summary of Economic Projections and Fed Chair Kevin Warsh’s post-decision press conference conveyed a distinctly hawkish stance. While elevated borrowing costs can diminish the attractiveness of equities, Wall Street experienced a rally on Thursday as investors found reassurance in the Fed’s measures, interpreting them as a steadfast commitment from the central bank to address persistently high inflation. The rate hike was also viewed as evidence of the Fed’s autonomy, which had been called into question following President Donald Trump’s demand for lower interest rates, coupled with threats to halt trading with nations exhibiting a U.S. surplus otherwise. Fixed-income investors, in particular, welcomed the rate hike as a sign that the Fed was not lagging behind the inflation curve, resulting in a rally in Treasury yields on Thursday. However, they resumed their climb on Friday, with the benchmark 10-year yield last up 5.9 basis points to 5.006 percent. The instrument had reached an apex not seen in over 19 years earlier this week. With the Fed decision now behind us, Wall Street is searching for the next potential catalyst to propel it back to all-time high levels. The S&P 500 is presently positioned 2% beneath its most recent record close. “We are still a few too many weeks away from earnings season to jump start the rally. In addition, we have more clarity from the Fed so that is no longer an impediment nor support to spark an advance to new highs,” Mark Luschini told. “The one item that is still fluid but could catalyze a rally is some form of détente with Iran that leads to a sustained decline in oil prices. The relief value that would be to mitigate some of the risk of high energy costs bleeding into second order effects, plus to reduce geopolitical risk premium, would likely be the near-term impetus for investors to bid stocks to new highs,” he added.

In relation to Iran, this week has witnessed some potentially positive indicators regarding diplomatic advancements between Washington and Tehran. Trump earlier this week said “hopefully we’re toward the end of the war,” adding that Iran was “very much wanting to make a deal.” Multiple sources have reported that the U.S. State Department has issued visas to prominent Iranian officials, including the president and foreign minister, for participation in the upcoming high-level meeting of the United Nations General Assembly in New York next week. In other developments, Chinese Foreign Minister Wang Yi urged both Washington and Tehran to demonstrate restraint and to facilitate the reopening of the Strait of Hormuz. Concurrently, Iranian Foreign Minister Abbas Araghchi engaged in discussions with officials from China and Pakistan, according to media reports. China stands as the largest purchaser of Iranian oil. The U.S. and Iran continue to find themselves at a stalemate regarding control of the strait, although recent military strikes between the two nations seem to have subsided once more. Axios reported that Trump was approaching a significant decision regarding the potential resumption of large-scale actions against Iran. The president is scheduled to engage with Gulf leaders during the UN meeting next week, as reported by Axios. Oil prices experienced a decline on Friday, reflecting a continued easing of concerns regarding supply disruptions. The crude benchmarks experienced a significant increase at the beginning of the week following the closure of the East-West Pipeline in Saudi Arabia. The kingdom had been utilising the critical conduit as a substitute for transporting crude through the Strait of Hormuz, and, as reported, a failure to resume operations within days could result in a loss of up to 4% of the global oil supply. The pipeline sustained damage during a period of intensifying conflict between Saudi Arabia and Iran-aligned Houthis in Yemen, introducing an additional layer of risk to oil supplies. Critically, the gains made by the Houthis in western Yemen have conferred upon the group enhanced leverage over the Bab el-Mandeb Strait. This strategic waterway, alongside the Strait of Hormuz, is essential for Saudi Arabia’s oil shipments to global markets. Oil markets have been buoyed by optimism regarding the potential for Saudi Arabia to soon resume partial flows through the pipeline. According to source, the kingdom aimed to restore approximately fifty percent of the pipeline’s capacity within a matter of days, in contrast to previous reports suggesting that the process could take weeks to complete. Riyadh has been providing extra crude cargoes to Asian refiners via ship-to-ship transfers at Oman’s Sohar port, presenting an alternative export route and alleviating certain worries regarding lost volumes, sources indicated.

Away from the Middle East, Wall Street’s attention this week was also captured by a significant uproar concerning the safety of AI. The narrative began last week after Anthropic researcher Jacob Coxon resigned, saying that neither Anthropic or OpenAI were “acting responsibly” and that the “people building AI earnestly” believed that it could “kill us all by the end of the decade.” Anthropic scientist Evan Hubinger then weighed in, saying Coxon was correct. On Saturday, Dario Amodei, the CEO of Anthropic, authored an extensive blog post advocating for a deceleration in the advancement of artificial intelligence. He emphasised a recent occurrence in which AI agents from OpenAI and the open-source platform Hugging Face engaged in unauthorised cybersecurity attacks on unrelated targets and sought to compromise the system assessing their performance. Other prominent figures in the AI industry have expressed their support for Amodei, including Sam Altman, the chief executive of OpenAI, Elon Musk, founder of xAI, and Demis Hassabis, co-founder and chair of Alphabet’s Google DeepMind. OpenAI on Wednesday disclosed six reports that highlight “unexpected or concerning” behaviour observed during the training or evaluation of its AI models. Trump has countered the apprehensions surrounding AI, labelling it a “hoax. On the other hand, California Governor Gavin Newsom on Friday issued an executive order convening a group of experts to develop a guide aimed at reinforcing and strengthening the state’s AI safety and security laws. Proposals currently under review encompass the mandate for companies to establish a “kill switch” for frontier models.

Another significant development on Friday was the announcement of Warren Buffett resigning from his position as chairman of Berkshire Hathaway. He will continue to serve as a director on the board and has been designated as chairman emeritus, while his chair position will be occupied by Howard Buffett. The legendary businessman assumed control of the company six decades ago when it was a struggling textile mill and transformed it into a sprawling conglomerate. In August 2024, Berkshire achieved the distinction of being the first U.S. company outside the technology sector to surpass a market capitalisation of $1 trillion. “I have served Berkshire since 1965. Sixty-plus years in, I still have the best job in the world. That is not something many people my age can say, and I have never felt better about what comes next,” Buffett said in a letter to shareholders. “Father Time always wins. He has, however, been generous with me. He has given me the opportunity to see Berkshire reach a point where I am more confident than ever about what lies ahead,” he said. “The company is in excellent hands,” he added.