By Noel Randewich and Purvi Agarwal
Aug 14 (Reuters) - The S&P 500 dipped from record highs on Friday, weighed down by Applied Materials, while investors digested weaker-than-expected retail sales data and transit through the Strait of Hormuz was mostly closed.
Applied Materials fell 5.5% after its upbeat quarterly forecast failed to impress investors. The chip equipment maker's shares have doubled in 2026 due to strong demand related to the buildout of AI data centers.
With investors nervous about
high valuations of AI-related stocks that have soared in recent years, Broadcom dropped 6.8% and the Philadelphia SE Semiconductor index fell 1.2%.
"A lot of the drivers in the market right now are around various parts of AI, and (Applied Materials) is an example of a company that had a 'beat and raise' but expectations were high and so the stock sold off," said Thomas Martin, senior portfolio manager at GLOBALT Investments in Atlanta.
Transit through the Strait of Hormuz appeared at a near standstill after two more ships were attacked there and the United States said it could maintain a naval blockade of Iran indefinitely. Those developments added to pessimism after a senior Iranian source said on Wednesday there had been no progress in talks to build on a June agreement to end the war.
The S&P 500 energy index rose 1.4%, tracking higher oil prices.
Reddit surged more than 10% after the social media company was named a new addition to the S&P 500 index, effective August 18.
Both the S&P 500 and the Nasdaq were on track for their third consecutive weekly gains, the longest winning streak since early April, as strong earnings and reduced bets on interest rate hikes after benign data lifted sentiment.
July retail sales data came in weaker than expected, after an unrevised 0.2% gain in June, the Commerce Department's Census Bureau said.
The S&P 500 was down 0.21% at 7,782.71 points after notching a record high close on Thursday.
The Nasdaq declined 0.41% to 26,692.65 points, while the Dow Jones Industrial Average was down 0.15% at 53,761.28 points.
While inflation related to high oil prices remains a concern, recent economic data has investors mostly expecting the Federal Reserve will hold interest rates steady at its meeting in September. Traders see a 67% chance the Fed will keep rates unchanged at the September meeting, with a 33% chance of a hike, according to CME's FedWatch.
The University of Michigan's preliminary consumer sentiment survey came in at 51 in August, below expectations of 54.5, according to economists polled by Reuters.
The aggregate earnings of S&P 500 companies have surged 52% in the second quarter, with much of that gain coming from Amazon, Microsoft and other AI heavyweights, according to LSEG. For all of 2027, analysts project a 34% increase in earnings, up from a projection of 27% at the start of July.
With the S&P 500 trading just below record highs, the index is valued at about 20 times expected earnings. That is up from about 19 at the end of July and below 22 at the start of 2026.
Workday slipped 3.1%. Reuters reported on Thursday that private equity firm Silver Lake was in talks to acquire the software firm.
Shares of some drone makers gained after President Donald Trump said late on Thursday that he would impose tariffs on imports of drones and their components. Red Cat rallied 6.3% and Unusual Machines jumped 22%.
Across the U.S. stock market, declining stocks outnumbered rising ones by a 1.1-to-1 ratio.
The S&P 500 posted 13 new highs and one new low; the Nasdaq recorded 73 new highs and 56 new lows.
(Reporting by Avinash P and Purvi Agarwal in Bengaluru, and by Noel Randewich in San Francisco; Editing by Tasim Zahid, Anil D'Silva, Rod Nickel)
