U.S. stocks slipped Thursday as a retreat in chip shares erased earlier gains and investor caution around diplomatic talks with Iran offset continued optimism about artificial intelligence demand. The S&P 500 closed down 0.38% at 7,337.11, while the Nasdaq fell 0.13% to 25,806.20 and the Dow Jones Industrial Average dropped 0.63% to 49,596.97.
Chipmakers led the pullback. The PHLX semiconductor index plunged 2.7%, trimming its hefty quarterly advance to about 47%, as investors pared back exposure after a recent run-up. Shares of Arm Holdings listed in the United States tumbled amid concerns the company may struggle to secure enough supply for its next-generation AI chip — worries that overshadowed an otherwise upbeat earnings forecast. Intel and several other large-cap chip names also gave up gains from earlier in the week.
Not all sectors followed tech downward. Cybersecurity stocks rose after cloud monitoring firm Datadog raised its revenue outlook, and household appliance maker Whirlpool slid after reporting a first-quarter sales miss. Trading was brisk across the market: 18.3 billion shares changed hands, above the 20-session average of 17.5 billion, and declining issues outnumbered advancers on the S&P by about 1.8-to-1. The benchmark registered 18 new highs and 11 new lows, while the Nasdaq recorded 132 new highs against 89 new lows.
Macroeconomic data offered a mixed backdrop. Weekly filings for unemployment benefits rose less than expected, and economists polled ahead of Friday’s closely watched nonfarm payrolls report expect U.S. job growth to slow to roughly 62,000 in April after a sharp rebound in March. The labor picture and persistent energy prices have reinforced trader bets that the Federal Reserve will keep interest rates steady through the rest of the year.
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Cleveland Fed President Beth Hammack said Thursday she expects the central bank to hold policy rates “for quite some time,” reflecting the current climate of uncertainty. Market participants have broadly interpreted recent comments from U.S. central bankers and steady economic readings as justification for a pause in tightening, even as equities wrestle with sector rotation and headline risk.
Geopolitics added another layer of caution. Reports that Washington and Tehran are closer to a temporary agreement to halt hostilities — a proposal Tehran is still reviewing — eased some of the acute risk seen earlier in the quarter but left key disputes unresolved, leaving markets sensitive to developments. Oil prices edged lower but remained around $100 a barrel, a level that keeps inflation risks alive for policymakers.
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Despite Thursday’s setback, the S&P 500 remains about 7% higher year-to-date, supported by strong demand for AI-related technology and an encouraging earnings season. With jobs data due Friday and central bank commentary likely to remain influential, investors are watching whether a cooling in tech momentum will broaden into a wider market correction or prove a temporary pause in an otherwise vigorous rally.
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