(Updates with mid-afternoon prices, analyst comment)

* Indexes down: Dow 0.23%, S&P 500 0.16%, Nasdaq 0.38%

* July retail sales unexpectedly fall

* Reddit soars on S&P 500 inclusion announcement

* Drone makers gain after Trump plans tariffs on drone,

component imports

By Avinash P and Purvi Agarwal

Aug 14 (Reuters) - Tech stocks dragged Wall Street lower on

Friday after propelling the S&P 500 to a record high in the

previous session, while investors digested weaker-than-expected

retail sales data and monitored developments in the Middle East.

The S&P 500 information technology index dropped

0.5%, with Broadcom ( AVGO ) taking the biggest jolt, down 5.5%.

The declines weighed down the Nasdaq.

Applied Materials ( AMAT ) fell 5.2%, even after the chip

equipment maker forecast fourth-quarter revenue above Wall

Street estimates. The Philadelphia SE Semiconductor index

fell 1%.

Data storage companies defied the broader decline, with

SanDisk ( SNDK ) and Western Digital ( WDC ) advancing 5.7% and

1.4%, respectively. Energy stocks on the S&P 500 rose

1.5%, tracking a rise in oil prices.

Reddit surged more than 12% after the social media

company was named a new addition to the S&P 500 index, effective

August 18.

Financial and healthcare stocks declined, pulling the Dow

lower.

"There is some profit taking, but I expect that most

institutional investors remain fairly optimistic," said Peter

Andersen, founder and CEO of Andersen Capital Management.

Both the S&P 500 and the Nasdaq were on track for their

third consecutive weekly gain, the longest winning streak since

early April, as strong earnings and reduced bets on interest

rate hikes after benign data lifted sentiment.

The July retail sales reading came in weaker-than-expected,

after an unrevised 0.2% gain in June, the Commerce Department's

Census Bureau said.

At 12:14 p.m. ET, the Dow Jones Industrial Average

fell 122.05 points, or 0.23%, to 53,717.94, the S&P 500

lost 12.71 points, or 0.16%, to 7,786.28 and the Nasdaq

Composite lost 101.63 points, or 0.38%, to 26,701.40.

"We will always have these slight disruptions when we have

negative economic news, especially when investors are trying to

figure out how the Fed will react to this kind of news," said

Andersen.

Rising energy prices linked to the conflict, along with

limited guidance from Fed Chair Kevin Warsh, left investors

scrutinizing economic data for clues on growth.

Developments in the Middle East remained in focus as transit

through the Strait of Hormuz appeared to have come to a near

standstill after two more ships were attacked and the U.S. said

it could maintain a naval blockade of Iran indefinitely.

The University of Michigan's preliminary consumer sentiment

survey came in at 51 in August, below expectations of 54.5,

according to economists polled by Reuters.

Among other stocks, Workday slipped 3.8%. Reuters

reported on Thursday that private equity firm Silver Lake was in

talks to acquire the software firm.

Shares of some drone makers gained after President Donald Trump

said late on Thursday that he would impose tariffs on imports of

drones and their components.

Red Cat ( RCAT ) added 8% and Unusual Machines ( UMAC )

jumped 25.5%.

Advancing issues outnumbered decliners by a 1.13-to-1 ratio

on the NYSE and by a 1.13-to-1 ratio on the Nasdaq.

The S&P 500 posted 12 new 52-week highs and one new low

while the Nasdaq Composite recorded 68 new highs and 47 new

lows.