* Western Digital ( WDC ), Sandisk ( SNDK ) slide despite upbeat forecasts

* Software stocks weighed down by AppLovin ( APP ), Datadog ( DDOG ) results

* SpaceX finds footing as investors eye lockup expiry

* Key nonfarm payrolls data due on Friday

* Indexes: Dow down 0.50%, S&P down 0.06%, Nasdaq up 0.17%

(Updates with midday-trading prices)

By Johann M Cherian and Shashwat Chauhan

Aug 6 (Reuters) - Wall Street's benchmark S&P 500 struggled

for direction in choppy trading on Thursday as investors took a

breather from a record-breaking rally earlier this week and

awaited any signs of a peace deal in the Middle East.

Chip stocks shrugged off earlier losses and traded mostly

higher, building on a rebound from late last week that sent the

S&P 500 and the blue-chip Dow to record highs, as strong

earnings from tech leaders renewed investor confidence in the AI

trade.

Marvell ( MRVL ), Qualcomm ( QCOM ) and Advanced Micro

Devices ( AMD ) gained about 2% each and aided a 1.8% rise in

the broader Philadelphia Semiconductor Index.

Limiting gains, data storage company Western Digital ( WDC )

lost 9.6% and memory chip maker Sandisk ( SNDK ) dropped 3.5%,

after having shot up 200% and 400% this year. Both stocks,

however, were trading off session lows. The companies forecast

quarterly revenue above expectations, betting on strong

AI-driven demand.

"There are just incredible expectations and chips have done

so well this year through June so there's just some digestion

going on in the market," said Hank Smith, director and head of

investment strategy at Haverford Trust.

Software stocks such as Atlassian ( TEAM ), Dow component

Salesforce ( CRM ), Adobe and Zscaler ( ZS ) were down

sharply following earnings reports from a few companies in the

sector.

AppLovin ( APP ) dropped 19.3% as the marketing platform

missed Wall Street estimates for quarterly revenue, while

Datadog ( DDOG ) lost 14.7% after the cloud security firm said

it expects revenue growth to slow in the third quarter.

At 11:18 a.m. ET, the Dow Jones Industrial Average

fell 269.67 points, or 0.50%, to 54,079.45, the S&P 500

lost 4.98 points, or 0.06%, to 7,718.57 and the Nasdaq Composite

gained 43.39 points, or 0.17%, to 26,405.61.

SPACEX LOCK-UP PERIOD EXPIRES

SpaceX shares wiped out earlier losses and were up

2.3%, defying expectations that they would be pressured by

insider selling, as the lock-up period for early investors

holding the stock expired.

At $111 apiece, the stock, however, was trading some way off

its offering price of $135, reflecting how its historic post-IPO

gains quickly fizzled out.

"At the level of the stock, you won't see that many shares

turnover. A lot of people are going to wait to monetize their

insider holdings when the share price goes back above the

offering (price)," said Brian Mulberry, chief market strategist

at Zacks Investment Management.

In geopolitics, Brent crude prices rose 2.2% above

$81 as investors weighed the back-and-forth regarding a

potential deal between Iran and the United States. The rise

pushed 2-year and 5-year Treasury yields

over 5 basis points each, further limiting stocks.

On the data front, the number of Americans filing claims for

unemployment benefits increased slightly last week.

The report came ahead of closely watched nonfarm payrolls

figures for July due on Friday that could be key in assessing

the Federal Reserve's future interest rate path at a time when

Chairman Kevin Warsh has dialed back any forward guidance.

Honeywell Aerospace ( HONA ) sank 21% as supply-chain issues

forced it to cut its annual sales target and forecast profit

below estimates.

Parker-Hannifin ( PH ) rose 7% as the motion and control

tech firm forecast full-year profit above estimates.

Advancing issues outnumbered decliners by a 1.07-to-1 ratio

on the NYSE and by a 1.11-to-1 ratio on the Nasdaq.

The S&P 500 posted 29 new 52-week highs and three new lows,

while the Nasdaq Composite recorded 108 new highs and 51 new

lows.