OVERVIEW
Morning Update

• Friday: SPY gained 0.54% to 771.35, while QQQ rose 0.46% to 744.50. Both finished within reach of last week’s highs after recovering from Thursday’s pullback.

• Breadth: Seven of the 11 S&P sector indexes advanced, and rising S&P stocks outnumbered decliners by 1.9 to 1. The session had broader participation than several of the rallies earlier this month.

• Premarket: SPY was 0.47% lower at 767.75 at 7:54 a.m. ET. QQQ was 0.62% lower at 739.86 at 8:05 a.m. ET, bringing Nasdaq back toward Friday’s low.

• Oil: Brent rose 3.8% to $108.30 in Reuters’ 5:59 a.m. ET snapshot after President Trump rejected Iran’s peace proposal. Further negotiations are still expected this week.

• Rates: Long-dated Treasury yields were rising again this morning. Reuters reported that markets were pricing approximately a 70% probability of another Fed increase in October.

• Today: The Dallas Fed’s September manufacturing survey is scheduled for 10:30 a.m. ET. The larger economic and earnings releases arrive later in the week.

MARKET ANALYSIS
Friday’s Participation Was Better

Friday gave the market a useful recovery after the weakness in the middle of the week. Technology led the sector gains, helped by Microsoft’s 3.7% advance, but Industrials also participated and most S&P sectors finished higher. Trading volume remained below its recent average, so we would recognise the improvement without treating it as decisive evidence of a broader turn.

The equal-weight funds participated as well. QQQE rose 0.38%, close to QQQ’s 0.46% gain, while RSP added 0.40% against SPY’s 0.54%. Those same-session comparisons give us little reason to dismiss Friday as a rally carried exclusively by the largest companies.

The medium-term picture remains less comfortable. Nasdaq still recorded substantially more new 52-week lows than highs, despite the positive session. We therefore have evidence of buyers responding to the recent pullback, but not yet enough to assume that the weaker parts of the market have recovered alongside the leaders.

SPY and QQQ Need to Retain Last Week’s Progress

SPY’s recovery brought it back toward our 775.30 resistance reference, but this morning’s weaker quote makes support the more immediate consideration. Friday’s low at 766.29 is close beneath the premarket price, followed by Thursday’s low near 763.25. Those areas give us a practical way to judge whether the latest pullback is being absorbed without surrendering the recent recovery. Pasted markdown

We would be comfortable with SPY spending more time consolidating beneath resistance. A sustained move through 775 would improve the chart, but a breakout is not required today. More important is whether buyers continue defending the recent lows rather than allowing another promising recovery to reverse.

QQQ faces a similar test from a stronger position. Friday’s close left it just below the recent high at 748.35, while today’s early quote puts it around Friday’s low of 739.64. The next area underneath is 734 to 735, where buyers responded on Thursday after the pullback reached 734.62.

That is a more useful reference for the current breakout than a distant moving average. We would regard a controlled pullback that holds this area differently from a sustained failure beneath it, particularly if selling spreads through the stocks that led last week’s advance. Monday’s breakout-session low around 728 provides a deeper reference should the decline continue.

Mid Caps and Small Caps Have More Work Ahead

MDY closed Friday at 665.87, up 0.32%, but remains approximately 3.4% below its 50-day average. Calculated from closing prices through Friday, that average is around 689.36. The first improvement would be a recovery through the recent highs around 667 to 673, while the support area near 660 remains important underneath.

Friday’s gain helped preserve that support, but it did not substantially change the trend. We would want several stronger sessions before treating mid caps as evidence that participation is broadening beyond large companies.

IWM is weaker still. It closed at 281.97, roughly 4.1% below its calculated 50-day average near 294.00, and was trading at 280.21 at 7:57 a.m. ET this morning. That leaves Thursday’s low at 279.05 close enough to be relevant from the open.

A recovery above Friday’s high near 283.50 would be an initial improvement, although it would still leave small caps well below trend. We are watching whether buyers defend the recent lows, rather than assuming that support must hold because the index has already fallen considerably.

Oil Has Reintroduced Pressure on Rates

The weekend brought a setback to the diplomatic progress that had helped markets last week. Trump said he had rejected Iran’s proposal, although he also indicated that U.S. negotiators were expected to continue talks. Brent’s rise toward $108 reflects renewed uncertainty over how quickly normal shipping conditions might return.

There has nevertheless been some improvement in physical supply. Preliminary Kpler figures cited by Reuters put September exports from major Middle Eastern producers at their highest level since the conflict began. Shipments through Hormuz have also recovered. Those additional flows provide some offset to the political uncertainty, but have not prevented today’s increase in prices.

Treasury yields were moving higher alongside crude this morning, with markets again leaning toward further Fed tightening. We would avoid attributing the entire bond move to oil, but the combination creates a less forgiving backdrop for equities than falling crude and stable yields would offer.

For positioning, we are more interested in whether this renewed pressure persists through the session than in treating a particular oil price as an automatic reason to sell. A sharp opening reaction that settles would leave room for the recent equity recovery to continue. Sustained increases in borrowing costs would make that recovery harder to extend.

PCE and Micron Make Wednesday Important

Today’s Dallas Fed survey provides another regional view of manufacturing, but Wednesday carries the more consequential scheduled releases. At 8:30 a.m. ET on September 30, the BEA publishes August Personal Income and Outlays, including PCE inflation, alongside the third estimate of second-quarter GDP.

The inflation report will help establish how prices were behaving before the latest September energy moves. We will be watching the underlying inflation detail and consumer spending together, since a firmer economy accompanied by persistent price pressure would leave less room for the Fed to become more patient.

Micron reports after Wednesday’s close, with its earnings call scheduled for 4:30 p.m. ET. Its outlook will be an important company-level test for the semiconductor trade after last week’s gains. We will be looking at demand, pricing, margins and investment plans, as well as whether the share-price reaction supports the optimism already reflected in the group.

The week finishes with the September employment report on Friday, October 2, at 8:30 a.m. ET. That gives investors fresh labour-market evidence alongside the inflation figures before expectations for the next Fed meeting become more settled.