Wall Street closed higher on Friday, with the S&P 500 gaining 0.51% to end at 7,743.41 points, while the Nasdaq Composite rose 0.48% to 27,068.72 points. The Dow Jones Industrial Average surged 0.93% to 51,828.62 points, according to Reuters. The gains capped a volatile week driven by uncertainty about artificial intelligence industry winners and concerns about the US war with Iran and rising Treasury yields. Seven of the 11 S&P 500 sector indexes rose, led by information technology, up 0.91%, followed by a 0.6% gain in industrials, as reported by Reuters. The S&P 500 gained 1.2% for the week, while the Nasdaq rose 2% for the week after it notched a record-high close on Tuesday. The Technology Select Sector SPDR Fund is up 37% year-to-date, with Microsoft's dramatic Copilot overhaul helping close the gap with its sector performance.
Microsoft rallied 3.7%, lifting its 2026 gain to 7% after the software giant unveiled a comprehensive Copilot overhaul that CEO Satya Nadella called the "biggest update to Copilot to date." The stock surge contributed significantly to the broader AI-related technology sector gains. The company integrated Chatbot (known as Chat) and a more advanced version (known as Cowork) into one place, while adding a new Code feature, targeted for use by non-technical employees, and an Autopilot tab for creating autonomous agents. Microsoft Office, which includes Word and Excel, is now fully embedded in the Copilot app, as reported by Reuters. Chip maker Qualcomm gained 4% and Dell advanced 5%, while Meta Platforms dipped 3.3% despite the social media company's stock soaring about 13% this week amid strong reception to its Muse AI agent. Alphabet shares are up 0.68% to $344.70 as the company continues competing for consumer AI audiences with Gemini.
Microsoft's Copilot pricing strategy is evolving as part of the comprehensive overhaul, with basic Chat functionality remaining covered under a flat, per-user license fee, while more advanced Cowork, Code and Autopilot features will be priced based on usage. As Jacob Andreou, executive vice president for Microsoft Copilot, explained on CNBC, this represents "the biggest update to Copilot to date" and positions Copilot as "this interface to AI, especially when you're bringing it to the workplace." The company has more than 30 million paid Copilot enterprise subscriptions and is reporting predictable revenue from seat counts, while the new pay-as-you-go model ties agentic revenue to actual usage. Oppenheimer analyst Brian Schwartz raised his price target on Microsoft stock to $570 from $515 and kept an Outperform rating, citing that customers are increasingly standardizing on Microsoft as the primary enterprise AI platform. The redesigned app is organized around three capabilities: a home hub for conversational chat and task delegation, a code tool for non-technical employees, and Autopilot as a persistent agent for complex multi-step tasks.
The S&P 500 traded just under 19 times expected earnings this week, marking its lowest valuation since 2023, as reported by Reuters. AI-related heavyweights are responsible for much of the recent increase in earnings expectations. Chip maker Qualcomm gained 5.4% and Dell also advanced 6.6%, while Meta Platforms dipped 3.6% despite the social media company's stock soaring about 13% this week amid strong reception to its Muse AI agent, which analysts say could benefit tech infrastructure stocks while challenging banks, online shopping platforms and other consumer businesses. Akamai Technologies rallied 3.2% after an $11.6 billion cloud services deal with AI leader Anthropic, with the deal including a warrant that could give Anthropic up to 5% of Akamai. Analysts at Piper Sandler wrote that "the narrative around Copilot has 'improved materially' this year" and view the updates favorably, noting that "Microsoft's earnings report in July rewarded us for our patience with the stock, and for our trust in Nadella and CFO Amy Hood." The Technology Select Sector SPDR Fund is up 37% year-to-date, with Microsoft's dramatic Copilot overhaul helping close the gap with its sector performance.
A report that US and Iranian negotiators continued to explore a phased path out of the war helped market sentiment, according to Reuters. The deal would involve Tehran reopening the Strait of Hormuz and Washington lifting its economic blockade. Brent crude eased but remained above $100 a barrel, while the yield on the benchmark US 10-year Treasury note hit a fresh 19-year high and was last up 3.4 basis points at 5.196%. Traders see a 66% chance of the Federal Reserve increasing interest rates by at least 25 basis points in October, up from around 50% earlier this week, according to the CME Group's FedWatch Tool. US President Donald Trump said he had a "very productive meeting" with President Xi Jinping, following a three-day summit that showcased personal diplomacy rather than big breakthroughs in economic relations. Data also showed strong AI-related capital expenditures boosted demand for key manufactured capital goods, outpacing expectations in August, as reported by Reuters.
