The S&P 500 and the Nasdaq fell on Thursday as renewed weakness in chip stocks overshadowed an upbeat start to second-quarter earnings, while investors parsed fresh economic data for clues on the health of the economy.
Semiconductor stocks extended losses from the previous session. The Philadelphia SE Semiconductor index fell 3.8%.
U.S.-listed shares of TSMC fell 2.5%, even after the advanced AI chipmaker reported stellar results, ramping up volatility in the market.
Memory-chip makers were among the biggest laggards, with Western Digital and Seagate Technology down 7.3% each, while Micron Technology fell 4.8%.
Chip stocks were earlier among the biggest beneficiaries of this year's rally, as optimism around AI spending by hyperscalers helped drive Wall Street to record highs.
Shiraz Ahmed, founder and CEO at Sartorial Wealth Inc, said the chip rally is cooling off, but not because AI is losing steam, but because AI adoption still isn't fully widespread yet. As a result, heavy capex spending continues across the AI ecosystem, from energy to semiconductors.
The benchmark S&P 500 has risen more than 10% this year and remains close to its June record closing high, leaving the rally vulnerable to any disappointment.
The consumer staples sector was leading gains on the benchmark with a 2.1% rise, while a 1.9% fall in the information technology sector muted gains on the rest of the index.
Investors parsed June retail sales datathat showed only a marginal rise as lower gasoline prices weighed on receipts at service stations. Still, bargain-hunting consumers continued to support underlying spending.
"Slower headline retail sales growth is actually positive, mainly because it reflects lower gasoline prices, not weaker consumer demand," said Bill Adams, chief U.S. economist at Fifth Third Commercial Bank.
"The report is constructive for second-quarter real GDP."
Separately, weekly jobless claims fell to 208,000 for the week ended July 11, below economists' expectations.
Benign inflation reportsfor June earlier this week reduced worries over tighter Federal Reserve policy.
Markets are currently pricing in about 88% likelihood that the Fed will stay on hold at this month's monetary policy meeting, according to CME's FedWatch tool.
At 09:50 a.m. ET, the Dow Jones Industrial Average rose 82.28 points, or 0.16%, to 52,740.92, the S&P 500 lost 29.56 points, or 0.39%, to 7,542.84 and the Nasdaq Composite lost 262.08 points, or 1.00%, to 26,007.14.
The latest in a slate of upbeat quarterly results, UnitedHealth raised its 2026 profit forecast, sending shares of the healthcare giant up 7.8% and kept the Dow afloat. The healthcare sector was up 2%.
Meanwhile, geopolitical risks remained in focus as U.S.-Iran tensions simmered.
Iran has asked Yemen's Houthi movement to stand ready to close the Red Sea oil route if the U.S. strikes Iranian power infrastructure, sources told Reuters, posing a fresh threat to global energy supplies.
United Airlines fell 2.8% as a renewed surge in oil prices weighed on its third-quarter and full-year profit outlooks.
GE Aerospace dipped 4.4%, despite the jet-engine maker lifting its 2026 profit forecast.
Advancing issues outnumbered decliners by a 1.02-to-1 ratio on the NYSE, while declining issues outnumbered advancers by a 1.55-to-1 ratio on the Nasdaq.
