Key Highlights

● A Citi upgrade of Valero landed Friday, though the new rating was unavailable.

● Brent climbed $3.94 to $109.86 a barrel, its highest close since May 19.

● Energy topped the six gaining S&P 500 sectors as the index fell 84.62 points.

● Valero reports Oct 22 before the open, with $21.23 per share expected.

The upgrade

Valero Energy (NYSE:VLO) was in focus on Friday after Citi upgraded the stock, according to a published headline. Further details of the call, including the new rating and any price target, were not available. The upgrade landed as crude prices spiked and energy led the S&P 500.

Valero, based in San Antonio, is one of the largest independent petroleum refiners in the United States, turning crude oil into gasoline, diesel and jet fuel at plants across the US Gulf Coast, the Midwest and abroad. It also has a significant renewable diesel business. Refiners make money on the spread between what they pay for crude and what they receive for fuel, so a jump in oil prices can help or hurt them, depending on how quickly fuel prices follow.

Refining in the spotlight

Signs of strong refining economics surfaced elsewhere in the sector. One headline said higher refining margins had added about $4.5 billion to Exxon Mobil's (NYSE:XOM) earnings. Exxon rose on Friday, as did Chevron (NYSE:CVX), market reports indicated.

Fuel prices have climbed sharply. US gasoline averages $4.33 a gallon, compared with $3.06 a year ago. Threats to Russian refining were among the factors behind Friday's rally in crude.

Crude's jump

Brent crude climbed $3.94 to $109.86 a barrel, its highest close since May 19, after touching $110 intraday. West Texas Intermediate also rose; one source put the December contract at $99.02, up $2.52, while other sources cited prices above $101.

Iran's escalating attacks on tankers in the Strait of Hormuz drove the move. ING commodities strategists said oil is "pricing in a significant risk premium." "Now, we're looking at Pickaxe Mountain. We may have to go there," President Donald Trump said of Iran.

The International Energy Agency pledged to release the remaining 100 million barrels under its March agreement, a Saxo Bank analyst noted. In Congress, Rep. Gregory Meeks introduced a bipartisan bill to revoke Russian energy transaction licenses.

The broader market

Energy's strength contrasted with losses elsewhere. The S&P 500 fell 84.62 points to 7,659.44, the Dow Jones Industrial Average lost 175.28 points to 52,002.41 and the Nasdaq Composite dropped 572.99 points to 26,140.03. Six of the S&P 500's 11 sectors finished higher, with energy on top.

Technology stocks led the declines as investors questioned the financing of artificial-intelligence infrastructure. The Cboe Volatility Index rose 3.53 points to 19.99, after an intraday peak of 22.31, the highest since June 11.

Treasury yields eased, with the 10-year at roughly 5.1. Fed Chair Kevin Warsh, speaking at an IMF gathering in Bangkok, said: "I don't prejudge meetings."

Valero Q3 Results and Refining Margins

Valero reports third-quarter results on Oct 22 before the open, with analysts expecting earnings of $21.23 per share. Investors will look for detail on refining margins, throughput and the outlook for the fourth quarter. Halliburton (NYSE:HAL) reports Oct 20 and SLB (NYSE:SLB) on Oct 23. The Fed's Oct 28 decision and any change in the situation around the Strait of Hormuz remain the main drivers for energy stocks.