The SP 500 and Nasdaq indices moved lower on Thursday as continued weakness in semiconductor stocks overshadowed the positive start to the second-quarter earnings season, while investors continued to assess the latest economic data for clues about the strength of the US economy.

The Philadelphia Semiconductor Index (SOX) fell 3.8%, extending its losses for a second consecutive session.

Taiwan Semiconductor Manufacturing Company (TSMC) shares also declined 2.5%, despite the company reporting strong financial results. The world's leading producer of advanced AI chips delivered solid earnings, but the report failed to lift sentiment across the semiconductor sector, adding to market volatility.

Memory chipmakers were among the biggest losers, with Western Digital dropping 7.3%, Seagate Technology falling by the same percentage, and Micron Technology losing 4.8%.

Semiconductor stocks have been among this year's strongest performers, fueled by optimism surrounding artificial intelligence spending by major cloud computing companies, helping drive Wall Street's benchmark indices to record highs.

Shiraz Ahmed, founder and CEO of Sartorial Wealth, said the rally in semiconductor stocks is beginning to lose momentumnot because enthusiasm for artificial intelligence has faded, but because broad adoption of AI technologies has yet to materialize. As a result, heavy capital spending across the AI ecosystem, from energy infrastructure to semiconductor manufacturing, remains in place.

The SP 500 has gained more than 10% since the start of the year and remains close to the record closing high it reached in June, leaving the market increasingly vulnerable to any earnings or economic disappointment.

Economic Data and Earnings Support Sentiment

Consumer staples led gains among the SP 500 sectors, rising 2.1%, while a 1.9% decline in the information technology sector limited broader market gains.

US retail sales for June posted only a modest increase, as lower gasoline prices weighed on revenue at service stations. However, consumers seeking lower prices continued to support underlying spending.

Bill Adams, Chief Economist at Fifth Third Commercial Bank, said the slowdown in headline retail sales growth is actually a positive development because it reflects lower gasoline prices rather than weakening consumer demand. He added that the report supports expectations for solid real GDP growth during the second quarter.

Meanwhile, initial weekly jobless claims fell to 208,000 in the week ended July 11, coming in below economists' expectations.

At the same time, June inflation data released earlier this week helped ease concerns over additional monetary tightening by the US Federal Reserve.

Markets are currently pricing in an 88% probability that the Federal Reserve will leave interest rates unchanged at this month's policy meeting, according to the CME FedWatch Tool.

As of 9:50 a.m. Eastern Time, the Dow Jones Industrial Average rose 82.28 points, or 0.16%, to 52,740.92. The SP 500 fell 29.56 points, or 0.39%, to 7,542.84, while the Nasdaq Composite declined 262.08 points, or 1.00%, to 26,007.14.

UnitedHealth raised its 2026 earnings forecast, sending its shares up 7.8% and helping support the Dow Jones Industrial Average, while the healthcare sector advanced 2%.

In contrast, United Airlines fell 2.8% as the latest rise in oil prices weighed on its third-quarter and full-year 2026 profit outlook. GE Aerospace also declined 4.4% despite raising its earnings forecast for 2026.

Geopolitical Tensions Remain in Focus

Escalating tensions between the United States and Iran remained firmly on investors' radar after Reuters reported, citing sources, that Iran had instructed the Houthi movement in Yemen to prepare to disrupt oil shipping through the Red Sea if the United States carries out strikes targeting Iran's energy infrastructure. Such a move would represent a fresh threat to global energy supplies.

Market breadth was mixed. Advancing stocks outnumbered decliners on the New York Stock Exchange by a ratio of 1.02 to 1, while declining stocks outpaced advancing issues on the Nasdaq by 1.55 to 1.