Key Highlights

● Targa jumped Friday with other pipeline and processing names as crude climbed toward $110.

● Its volumes depend on producer drilling activity, which tends to rise with energy prices.

● The S&P 500 ended a 55-session run without a large one-day drop.

● Kinder Morgan reports Oct 21 after the close, and the Fed decides Oct 28.

Midstream on the move

Targa Resources (NYSE:TRGP) jumped on Friday, closing at $294.22, according to market data, as midstream stocks rode a sharp climb in crude prices. The Houston-based company gathers, processes, transports and stores natural gas and natural gas liquids, with major operations in the Permian Basin and along the Gulf Coast. Its volumes depend on drilling activity by producers, which tends to pick up when energy prices rise.

Targa was part of a broad advance. Kinder Morgan (NYSE:KMI), another major pipeline operator, also jumped, closing at $34.22, while producers Diamondback Energy (NASDAQ:FANG) and EOG Resources (NYSE:EOG) posted similar gains. Smaller midstream name Antero Midstream (NYSE:AM) rose as well.

Oil's run toward $110

Brent crude climbed $3.94 to settle at $109.86 a barrel, its highest close since May 19. One report said Brent touched $110 during the session for the first time since May. West Texas Intermediate also advanced, though quotes differed by contract and source: the December contract settled at $99.02 in one report, while another cited $101.71 for the November contract.

The rally reflected Iran escalating attacks on tankers in the Strait of Hormuz and threats to Russian refining, according to market reports. ING commodities strategists said oil is "pricing in a significant risk premium."

President Donald Trump's comments added to the tension. "Now, we're looking at Pickaxe Mountain. We may have to go there," he said of Iran. Meanwhile, the International Energy Agency pledged to release the remaining 100 million barrels under its March agreement, a Saxo Bank analyst noted.

Rotation out of tech

Friday's energy strength stood in contrast to the wider market. The S&P 500 fell 84.62 points to 7,659.44, the Nasdaq Composite dropped 572.99 points to 26,140.03 and the Dow Jones Industrial Average slipped 175.28 points to 52,002.41.

The selling centered on chipmakers and software companies, as investors questioned how the build-out of artificial intelligence will be financed. One market commentator said, "The AI group is now splitting between companies that can fund the buildout themselves and those that have to borrow." Money flowed toward energy, utilities, consumer staples, health care and financials, and six of the S&P 500's 11 sectors finished higher.

The S&P 500 also ended a run of 55 sessions without a large one-day drop, the longest such streak in more than six years.

Lower yields helped

Treasury yields eased, a supportive backdrop for dividend-paying infrastructure stocks. The 10-year yield ended at roughly 5.1, down for the week, after topping 5.3 earlier in October, its highest since 2002. Federal Reserve Chair Kevin Warsh, speaking at an IMF gathering in Bangkok, declined to signal the October decision. "I don't prejudge meetings," he said.

Targa Tracks Kinder Morgan and Drilling Reads

Midstream earnings season begins in earnest next week, with Kinder Morgan scheduled to report Oct 21 after the close, a release that often sets the tone for the group. Halliburton (NYSE:HAL) reports Oct 20 and SLB (NYSE:SLB) Oct 23, offering a read on the drilling activity that feeds volumes for processors such as Targa. On the macro side, the Fed announces its next rate decision Oct 28, and markets still price a hike by December. Any change in the situation in the Strait of Hormuz could swing crude, and energy stocks with it.