S&P 500, Nasdaq fall as chips extend losses; earnings and data in focus

By Ragini Mathur and Avinash P

July 16 (Reuters) – The S&P 500 and the Nasdaq slipped 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, with the Philadelphia SE Semiconductor index down 3.5%. U.S.-listed shares of TSMC fell 2.1%, even after the advanced AI chipmaker reported stellar results.

Memory-chip makers were among the biggest laggards. Sandisk fell about 10%, while Western Digital and Seagate Technology were down 8% and 7.5%, respectively.

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 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 tech-led selloff pulled the benchmark lower, even as every other sector except technology traded higher.

Healthcare shares helped cushion the broader market, with gains of 2.2%.

UnitedHealth raised its 2026 profit forecast, sending shares of the healthcare giant up 4.3% and keeping the Dow afloat.

Abbott jumped 12% after beating quarterly estimates and lifting its annual profit outlook.

Defensive groups, including consumer staples and real estate, also helped limit losses, rising about 2% each.

At 11:51 a.m. ET, the Dow Jones Industrial Average rose 133.94 points, or 0.25%, to 52,792.58, the S&P 500 lost 5.77 points, or 0.08%, to 7,566.63 and the Nasdaq Composite lost 156.53 points, or 0.60%, to 26,111.19.

DATA SUPPORTS GROWTH OUTLOOK

Investors parsed June retail sales data that showed only a marginal rise as lower gasoline prices weighed on receipts at service stations. Still, bargain-hunting consumers continued to support underlying spending.

Separately, the number of Americans filing claims for unemployment benefits fell last week, pointing to continued labor market stability.

“The upshot is that consumption appears to be gaining some momentum, which, at the margin at least, provides some support to our forecast that the Fed will raise interest rates later this year,” said Stephen Brown, chief North America economist at Capital Economics.

Benign inflation reports for June earlier this week reduced worries over any imminent rate hike by the Federal Reserve.

Markets are pricing in an 88% chance the Fed will hold rates steady at this month’s meeting and about a 50% chance of a quarter-point hike in September, according to CME’s FedWatch tool.

Geopolitical risks also loomed large as Iran has asked Yemen’s Houthi movement to prepare to close the Red Sea oil route if the U.S. strikes Iranian power infrastructure, sources told Reuters.

United Airlines fell 1.4% as a renewed surge in oil prices weighed on its third-quarter and full-year profit outlooks.

GE Aerospace dipped 4.7%, despite the jet-engine maker lifting its 2026 profit forecast.

Advancing issues outnumbered decliners by a 1.12-to-1 ratio on the NYSE, while declining issues outnumbered advancers by a 1.38-to-1 ratio on the Nasdaq.

(Reporting by Ragini Mathur and Avinash P in Bengaluru; Editing by Maju Samuel and Devika Syamnath)