U.S. equities closed lower on Friday, pulling back from a week of record highs as investors took profits and disappointing retail sales data added to concerns about consumer strength. The S&P 500 slipped 0.2% to 7,785.76, while the Nasdaq Composite fell 0.3% to 26,729.16. The Dow Jones Industrial Average dropped about 108 points, or 0.2%, to 53,732.41.
Despite the pullback, the S&P 500 managed a third consecutive weekly gain, rising 0.4% for the period. The Nasdaq also posted its third straight weekly advance, while the Dow ended the week 0.6% lower.
Applied Materials leads semiconductor decline
Applied Materials was the biggest drag on the market after investors reacted negatively to its latest earnings outlook, even though the company offered an upbeat quarterly forecast. The chip equipment maker, whose shares have doubled so far in 2026 on strong AI-related demand, led a broad slide in semiconductor stocks. Other AI-linked names, including Broadcom and Intel, also moved lower as concerns about elevated valuations persisted following a strong rally in tech shares.
The weakness in chips came despite robust corporate earnings. According to LSEG, aggregate second-quarter earnings for S&P 500 companies have surged 52%, driven largely by technology giants such as Amazon and Microsoft. With more than 90% of S&P 500 companies having reported, FactSet data shows earnings growth is tracking around 50% year-over-year.
In other corporate news, Reddit jumped after being selected for inclusion in the S&P 500 index, effective Aug. 18. Drone makers including Red Cat and Unusual Machines also gained after President Donald Trump announced tariffs on imported drones and components.
Weak retail sales add to economic concerns
Economic data released Friday pointed to softer consumer activity. U.S. retail sales unexpectedly declined in July after a 0.2% increase in June, while the University of Michigan's preliminary consumer sentiment index fell to 51 in August, below the 54.5 economists had expected.
The weaker data followed this week's inflation reports, which largely matched forecasts and reinforced expectations that the Federal Reserve will leave interest rates unchanged at its September meeting. According to CME FedWatch, traders now see a 67% probability of a hold, with a 33% chance of a rate increase.
Energy stocks gain as oil prices rise
While technology struggled, energy stocks outperformed as crude oil prices advanced amid renewed geopolitical tensions in the Middle East. Transit through the Strait of Hormuz remained severely disrupted after additional attacks on vessels, and the United States reiterated it could maintain a naval blockade of Iran indefinitely. Those developments supported higher oil prices and lifted the S&P 500 energy sector.
The broader market continues to trade at elevated valuations despite Friday's decline. The S&P 500 is currently valued at roughly 20 times expected earnings, above the multiple at the end of July but below levels seen at the beginning of 2026.
Workday shares retreated after soaring in the previous session on reports that private equity firm Silver Lake is in talks to acquire the software company.
For more on the chip sector's recent moves, see our analysis of Applied Materials' earnings outlook. Also, check how chip selloffs have impacted the Dow in recent sessions.
This article is for informational purposes only and does not constitute financial advice.
