U.S. stocks drifted lower from record heights on Friday as investors digested a surprisingly weak report on July retail sales and monitored rising oil prices driven by developments in the Middle East. According to the Commerce Department’s Census Bureau, July retail sales unexpectedly fell after an unrevised 0.2% gain in June, reported Reuters. The weaker economic data raised risks of a slowing economy while inflation remains high, leading to concerns about potential stagflation.
US Stocks Slip From Record Highs Amid Weak Retail Sales and Rising Oil
The S&P 500 slipped 0.3% from its all-time high set the previous day, while the Dow Jones Industrial Average fell 131 points, or 0.2%, as of afternoon trading, according to AP News. Technology stocks dragged Wall Street lower, with the S&P 500 information technology index dropping 0.5%. Broadcom took the biggest jolt among tech firms, falling 5.5%. Applied Materials fell despite forecasting fourth-quarter revenue above Wall Street estimates, as investors reacted to expectations that had already built up after its stock more than doubled during the year.
Consumer Sentiment and Inflation Concerns
Consumer sentiment also weakened more than expected in August. The University of Michigan’s preliminary consumer sentiment survey came in at 51, falling below economists’ expectations of 54.5. The survey noted that drops occurred across the political spectrum, showing up particularly among older, lower-income, and other groups vulnerable to inflation.
Jennifer Timmerman, senior investment strategy analyst at Wells Fargo Investment Institute, noted that the drop in retail sales could simply be a snapback following months boosted by unusual factors such as big tax refunds, the World Cup, and an earlier Prime Day event at Amazon. Meanwhile, shorter-term Treasury yields edged lower following the retail sales report, suggesting traders saw the Federal Reserve as less likely to hike interest rates at its September meeting. However, the yield on the 10-year Treasury rose to 4.70% from 4.63% late Thursday.
Sector Movements and Market Highlights
While technology and financial and healthcare stocks weighed on the broader indexes, energy stocks on the S&P 500 rose 1.5%, tracking an increase in oil prices. Investor sentiment was also impacted by developments in the Middle East, where transit through the Strait of Hormuz appeared to come to a near standstill after two more ships were attacked, and the U.S. stated it could maintain a naval blockade of Iran indefinitely.
Among standout individual stock movements:
- Reddit: Surged more than 12% after being named a new addition to the S&P 500 index, effective August 18.
- Drone Makers: Gained following President Donald Trump’s announcement that he would impose tariffs on imports of drones and their components, with Red Cat and Unusual Machines seeing notable jumps.
- Data Storage: Defied broader market declines, with Sandisk and Western Digital advancing 5.7% and 1.4%, respectively.
Despite Friday’s pullback, both the S&P 500 and the Nasdaq remained on track for their third consecutive weekly gain—their longest winning streak since early April—bolstered by strong earnings and earlier benign inflation data that reduced bets on interest rate hikes.
