US stocks closed lower on Friday, with the S&P 500 retreating from its record highs as investors weighed a cocktail of economic data and simmering geopolitical tensions in the Middle East. The benchmark index ultimately finished down, marking a pause after a period of strong gains.
Market sentiment was dampened by the release of July retail sales figures, which showed a weaker-than-expected performance. Retail sales fell 0.6% in July, a reversal from the 0.2% increase seen in June and below the 0.1% growth anticipated by economists. This slowdown in consumer spending is raising concerns about the overall health of the economy. Adding to the cautious mood, transit through the Strait of Hormuz was reportedly near a standstill following attacks on vessels, further exacerbating anxieties already heightened by ongoing conflicts in the region.
In the corporate world, Applied Materials experienced a notable decline after its upbeat quarterly forecast failed to impress investors, despite the company's shares having doubled in 2026 on strong demand from AI data center buildouts. Investors also grew nervous about the high valuations of AI-related stocks, leading to drops in companies like Broadcom. On the other hand, energy stocks saw a boost, tracking higher oil prices, and Reddit experienced a significant surge following news of its inclusion in the S&P 500 index.
The Federal Reserve's interest rate outlook also remained a key focus. While recent inflation data, with the Consumer Price Index rising 0.1% in July and annual inflation at 3.4%, has eased some concerns about further rate hikes, market participants are closely watching for any signals that might influence future monetary policy decisions. The uncertainty surrounding both economic data and geopolitical stability continues to shape investor strategy as the market navigates these complex crosscurrents.
