S&P 500 and Dow rise on hopes of a Middle East peace agreement

The S&P 500 and Dow Jones Industrial Average posted modest gains in choppy trading on Friday, supported by expectations of a near-term peace agreement in the Middle East, while investors prepared for the market debut of Elon Musk's SpaceX, which is expected to become the largest public offering in Wall Street history.

Investor sentiment improved after President Donald Trump said on Thursday that an agreement to end the Middle East conflict and reopen the strategically important Strait of Hormuz could be signed as early as this weekend, although Tehran has stressed that a final decision has yet to be made.

SpaceX shares are expected to begin trading on the Nasdaq later today, with the company projected to immediately become the seventh-largest publicly traded US company by market value, carrying a potential valuation of $1.75 trillion.

Only around 3% to 4% of the company's shares are expected to be freely tradable, while Reuters reported that demand for the IPO exceeded available shares by roughly four times.

"An industry-dominating company worth $1.77 trillion doesn't enter the market quietly—it pulls liquidity away from the rest of the market," said Joel Shulman, chief executive of ERShares, which manages a fund with exposure to SpaceX.

Shares of other space-related companies, which had rallied ahead of the listing, retreated in early Friday trading. Rocket Lab fell 5.4%, Intuitive Machines declined 8.3%, and Planet Labs lost 6.6%. In contrast, funds holding SpaceX shares, including Fundrise Innovation Fund, gained 3.4%.

Eight of the eleven major sectors within the S&P 500 advanced, led by the materials sector.

Meanwhile, the Philadelphia Semiconductor Index slipped 0.3% as chip stocks lost some momentum following a strong rebound in the previous session.

Shares of Broadcom, Micron Technology, and Marvell Technology fell between 1% and 2.5%.

Analysts believe part of the weakness in US equities and Bitcoin's 16% decline last week was driven by investors reducing positions ahead of the SpaceX offering.

"In the absence of new capital flowing into the market, it's mathematically inevitable that an offering of this size will affect other companies," Shulman said.

US equity funds recorded their first weekly outflows in three weeks, while the US technology sector officially entered correction territory earlier this week.

As of 9:32 a.m. Eastern Time, the Dow Jones Industrial Average rose 303.74 points, or 0.60%, to 51,152.85. The S&P 500 gained 13.30 points, or 0.18%, to 7,407.60, while the Nasdaq Composite slipped 25.38 points, or 0.10%, to 25,784.28.

All three major US indexes were on track to finish the week with limited changes as uncertainty surrounding the Iran conflict persisted, alongside concerns that the powerful rally in artificial intelligence stocks may have become overstretched.

SpaceX, which also includes Starlink and xAI, has already broken several traditional Wall Street conventions. Index providers including Nasdaq and FTSE Russell modified listing requirements to facilitate the company's inclusion, while SpaceX set its share price at $135 even before beginning its roadshow, highlighting Elon Musk's considerable influence over the offering process.

Despite the excitement surrounding the IPO, some analysts have warned about the company's financial fundamentals after it reported annual losses exceeding $4 billion last year.

Data released earlier this week also showed inflationary pressures continuing to build due to higher energy costs linked to the Middle East conflict.

Oil prices fell below $90 per barrel following Trump's remarks, while traders pushed expectations for a Federal Reserve rate hike back to December from October, according to the FedWatch tool.

Among individual stocks, Adobe fell 8.6% after the departure of Chief Financial Officer Dan Durn.

Advancing stocks outnumbered decliners by a ratio of 2.06-to-1 on the New York Stock Exchange and 1.36-to-1 on the Nasdaq.

The S&P 500 recorded 20 new 52-week highs and two new lows, while the Nasdaq registered 78 new highs and 20 new lows.