U.S. stocks recovered from a couple of down sessions as oil prices fell on hopes for progress toward an agreement between the U.S. and Iran to open the Strait of Hormuz.

The Dow Jones Industrial Average set the pace for Friday's gains, rising 478.6 points, or 0.93%, to 51828.6. The tech-heavy Nasdaq Composite climbed 129.3 points, or 0.48%, to 27068.7. The S&P 500 moved up 39.3 points, or 0.51%, to 7743.41.

The indexes finished the week higher, despite a midweek selloff.

The leg-up for equities came in tandem with a pause in the global bond selloff. The yield on the 10-year benchmark pulled back after hitting a high of 5.228%. The 30-year yield settled at 5.5% after breaking above that level for the first time in 22 years. The two-year yield edged down to 4.862%.

Oil prices declined, partially unwinding their sharp rise from earlier in the week, on unconfirmed reports that U.S. and Iranian negotiators were working on a deal to reopen the Strait of Hormuz. International benchmark Brent crude dropped 2.1% to $104.32 a barrel.

Higher bond yields often make stocks less appealing but markets have largely held up thanks to strong earnings growth and a solid economy, said Mona Mahajan, head of investment strategy and asset allocation at Edward Jones.

"If bond yields stay elevated or continue to rise and stay there for an extended period of time, that could weigh on both stocks and growth," Mahajan said. "But thus far, I think the growth story is challenged, but not derailed in any way."

The University of Michigan's consumer sentiment reading weakened in September, but wasn't as gloomy as the preliminary estimate. Consumers' inflation expectations, including for long-term inflation, have increased, the survey said.

Throughout the week, Federal Reserve officials have said that tamping down inflation is the central bank's top priority as the labor market continues to hum and parts of the economy show growth. Several have indicated that more hikes are coming unless inflation data starts showing signs of progress.

The Fed funds futures market is currently pricing in three more quarter-point rate increases by the end of 2027. One of those could come next month. Odds for an October rate hike currently sit at more than 66%, according to the CME FedWatch tool.

Some investors caution that if the 10-year yields remain near 5.20% or climbs even higher, borrowing costs could begin to drag on risk assets and broader economic growth.

"It's starting to edge into that restrictiveness zone where it's going to begin to exert downward pressure on risk assets and economic activity," said Joseph Purtell, a portfolio manager and rates trader at Neuberger Berman. "Financial conditions are certainly less accommodative than they were several months ago, thanks to higher rates across the curve."

Meta Platforms dropped 3.3% to $751.66. The stock is giving back some of the gains it made this week from the well-received rollout of Meta's AI agent Muse. It closed the week up 13%.

Microsoft ended the week with its highest close since November, rising 3.7% to $516.17, making it the best performer in the Dow Jones Industrial Average. The company announced new capabilities for its Copilot app, part of its push to monetize its artificial intelligence.