The S&P 500 closed lower on Friday, as investors weighed weaker-than-expected retail sales data and geopolitical tensions in the Middle East. The index fell 13.41 points, or 0.17%, to end at 7,785.58, while the Nasdaq Composite and Dow Jones also recorded losses.
The decline was influenced by a drop in Applied Materials' stock, despite the company's positive quarterly forecast. Investors were unimpressed, leading to a sell-off in AI-related stocks, including Broadcom and Intel. The S&P 500 energy index, however, rallied on rising oil prices amid tensions in the Strait of Hormuz, where transit was disrupted following attacks on ships.
Retail sales data for July came in below expectations, with only a 0.2% gain in June. This added to concerns about consumer sentiment, which was reported at 51 in August, below the anticipated 54.5. Despite these figures, traders largely expect the Federal Reserve to maintain interest rates at its September meeting, with a 67% probability of no change.
“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.”
Thomas Martin, senior portfolio manager at GLOBALT Investments
The aggregate earnings of S&P 500 companies surged 52% in the second quarter, driven by major players like Amazon and Microsoft. The index is currently valued at about 20 times expected earnings, reflecting high valuations in the AI sector.
Background
The S&P 500 has been experiencing volatility due to high valuations in AI-related stocks and geopolitical tensions. The recent attacks in the Strait of Hormuz have further complicated market dynamics, while economic indicators like retail sales and consumer sentiment continue to influence investor decisions.
As geopolitical tensions and economic data continue to influence market dynamics, investors will be closely monitoring developments in the Middle East and upcoming Federal Reserve meetings for further direction.
