By Noel Randewich
Aug 14 (Reuters) - The S&P 500 closed lower on Friday, dipping from a record high and weighed down by Applied Materials, while investors digested weaker-than-expected retail sales data.
Applied Materials fell 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, chipmakers including Broadcom and Intel also dropped on Friday.
"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 rallied, tracking higher oil prices.
Reddit surged after the social media company was named a new addition to the S&P 500 index, effective August 18.
July retail sales data came in weaker than expected, after an unrevised 0.2% gain in June, the Commerce Department's Census Bureau said.
According to preliminary data, the S&P 500 lost 13.41 points, or 0.17%, to end at 7,785.58 points, while the Nasdaq Composite lost 73.86 points, or 0.28%, to 26,729.16. The Dow Jones Industrial Average fell 108.53 points, or 0.20%, to 53,732.53.
While inflation related to high oil prices remains a concern, recent economic data has investors mostly expecting the Federal Reserve to hold interest rates steady at its September meeting. 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.
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 dipped. The stock soared 18% on Thursday after Reuters reported 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 he would impose tariffs on imports of drones and their components. Red Cat and Unusual Machines both jumped.
(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)
