Microsoft gives Copilot a much-needed overhaul, and the stock deservedly soars

Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. Stocks were higher Friday and headed for a winning week . The strength in the S & P 500 and Nasdaq came despite soaring bond yields. The 10-year Treasury yield briefly reached 5.23% on Friday, a level not seen since mid-June 2007. The surge in yields has been driven by concerns about inflation, which has been stoked by elevated oil prices. While lower Friday and set to break three straight weeks of higher prices, West Texas Intermediate crude is still up nearly 40% since the Iran war started in late February. Last week, the Federal Reserve raised interest rates for the first time in three years, in a move to try to put inflation on a path towards the central bank's 2% target. According to the CME FedWatch tool, the market sees a second rate increase by the end of the year, and possibly one more. Bank stocks have lost roughly 4% since the Sept. 16 rate hike, as measured by the State Street Financial Select Sector ETF , ticker symbol XLF. Our four banks — Wells Fargo , Capital One , Goldman Sachs , and BNY — have traded down with the rest of the financials. In Friday commentary already in members' email inboxes, we argued that the market should not be painting the sector with a broad brush. Microsoft has given its Copilot AI tool a major facelift — and the market likes what it sees, sending shares of the cloud and software giant up more than 4%. Microsoft is the best-performing member of the "Magnificent Seven" in Friday's session. It's also levitating above a basket of software stocks, the iShares Expanded Tech-Software Sector ETF , which is down about 0.4%. At the heart of the update is a new, comprehensive Copilot app. For starters, the app integrates existing Copilot capabilities such as a simple chatbot (known as Chat) and a more advanced version (known as Cowork) into one place. It also adds a new Code feature, targeted for use by non-technical employees, and an Autopilot tab, where people can create autonomous agents to complete certain tasks. The key is housing all these AI capabilities within a singular Copilot app. Microsoft Office, which includes Word and Excel, is now fully embedded in the Copilot app, CEO Satya Nadella wrote on social media. Nadella argued this is the "biggest update to Copilot to date." Microsoft's Copilot pricing strategy is also evolving as part of the overhaul. While the basic Chat functionality will remain covered a flat, per-user license fee, the more advanced Cowork, Code and Autopilot features will be priced based on usage. "Every era of technology has basically had a new kind of defining interface," Jacob Andreou, executive vice president for Microsoft Copilot, said on CNBC earlier Friday. "For the PC era, Office became that interface for work for so many people. And with Copilot, that's really going to become this interface to AI, especially when you're bringing it to the workplace." In the race to bring AI to the enterprise, Microsoft has been criticized for falling behind Anthropic's Claude and OpenAI's ChatGPT, so Friday's exuberant market reaction is notable. Microsoft's messaging also suggests a sharper focus on business customers rather than the consumer chatbot horse race. We have no issues with ceding AI consumer to the likes of Apple , Google and Meta , all of which are more consumer-oriented than Microsoft. "We believe this is MSFT's 'super app' that has been speculated on for months and view the updates favorably," analysts at Piper Sandler wrote to clients Friday. The narrative around Copilot has "improved materially" this year, they added. We agree with them. Microsoft's earnings report in July rewarded us for our patience with the stock, and for our trust in Nadella and CFO Amy Hood. Injecting life into Copilot is another reason to be grateful we stuck around. Coming up next week , both sides of the Fed's dual mandate of maximizing employment and fostering stable prices come into focus. The September ADP report on private sector hiring comes out on Wednesday, and the government releases weekly jobless claims on Thursday. It all leads up to Friday's government monthly employment report. Despite simmering inflation, the job picture has been pretty good. However, economists expect about 85,000 nonfarm jobs to have been created in September, just over half the additions from the prior month. The stable-prices mandate will be in the spotlight Wednesday morning. The Fed's preferred inflation gauge, the PCE price index for August, is expected to remain well above the Fed's 2% target. Also on the calendar, Club name Micron reports earnings on Wednesday evening. The stock has ridden the soaring prices from the global memory shortage to year-to-date gains of nearly 280%. In this environment, a beat and raise might be the bare minimum to avoid a steep post-earnings decline. The memory trade, while on fire in 2026, has been volatile. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. 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