Dow ends 400 points higher as investors buy AI stocks; Microsoft rallies

Wall Street finished higher on Friday, propelled by Microsoft and other AI-related technology stocks. The S&P 500 climbed 37.96 points, or 0.49%, to 7,742.09 points, while the Nasdaq Composite rose 125.51 points, or 0.47%, to 27,064.88. The Dow Jones Industrial Average increased 469.07 points, or 0.91%, to 51,819.05.Microsoft's stock surged following the unveiling of new features in its Copilot app, such as a coding tool and an always-on AI agent.

Akamai Technologies experienced a significant boost after securing a $11.6 billion cloud services agreement with AI leader Anthropic, which could potentially grant Anthropic up to 5% of Akamai. Qualcomm and Dell also saw gains. However, Meta Platforms saw a dip, as its stock surged approximately 13% this week due to a positive reception for its Muse AI agent.

The S&P 500 this week has traded near 19 times expected earnings, marking its lowest valuation since 2023, according to LSEG data. AI-related heavyweights are largely responsible for the recent increase in earnings expectations. A report suggested that US and Iranian negotiators were still considering a phased resolution to the war, which could involve Iran reopening the Strait of Hormuz and the United States lifting its economic blockade.

Strong AI-related capital expenditures in August also boosted demand for key manufactured capital goods, surpassing expectations. Brent crude eased but remained above $100 a barrel, while the yield on the benchmark US 10-year Treasury note hit a 19-year high, closing at 5.196%. Traders now see a 66% chance of the Federal Reserve raising interest rates by at least 25 basis points in October, up from around 50% earlier in the week.

US President Donald Trump claimed to have had a highly productive meeting with President Xi Jinping during a three-day summit that highlighted personal diplomacy rather than significant economic progress. Magazine publisher People Inc. saw a jump after a report indicated that MGM Resorts International was considering a bid for the company.