Records set earlier in the week
A robust earnings season has tempered some concerns about the massive spending by AI-related companies. That, and growing optimism over the potential end of hostilities in the Iran war, helped propel both the Dow Industrials and S&P 500 to record highs earlier this week.
Oil prices rose, with US crude settling up 2.75% at $US77.29 a barrel and Brent settling at $US82.49 per barrel, up 3.83%.
Iranian news agency Fars reported that a parliamentary committee in Iran is reviewing a preliminary bill that would bar US, Israeli and other "hostile" vessels from transiting the Strait of Hormuz.
‘Headline fatigue’ mutes the reaction
"You’re seeing perhaps more muted response to macro news than you would otherwise see, probably due to the fact of the summer and a little bit of fatigue, there’s a little bit of headline fatigue, specifically around Iran," said Robert Bernstone, head of trading at SummitTX Capital in New York.
"Iran is having less of an impact right now, to be clear, I’m not saying it has no impact ... tweets are something, headlines are something, but we really want to see the devil is in the details."
The Dow Jones Industrial Average fell 464.02 points, or 0.85%, to 53,885.10, the S&P 500 lost 13.52 points, or 0.18%, to 7,710.03 and the Nasdaq Composite lost 15.09 points, or 0.06%, to 26,348.35.
The recent indications of movement toward a peace deal helped push crude prices lower earlier in the week. That, in turn, eased inflation worries and expectations for a rate hike from the Federal Reserve, which also served to push US Treasury yields lower.
Earnings hit chip and software names
Data storage company Western Digital tumbled 13% and memory chip maker Sandisk dropped 6.8% following their quarterly results.
Both companies have surged this year, however, with Sandisk up more than 400% and Western Digital up about 160%.
AppLovin plunged 19.7% after the marketing platform missed Wall Street estimates for quarterly revenue. Datadog plummeted 19% after the cloud security firm said it expects revenue growth to slow in the third quarter.
Both stocks were among the biggest drags on the benchmark S&P index.
Of the 382 companies in the S&P 500 that have reported earnings through Wednesday morning, 84.8% have topped analyst expectations, according to LSEG data, well above the 68% average beat rate since 1994.
SpaceX shares erased losses from earlier in the session and closed 6.1% higher, defying expectations that they would be pressured by insider selling, as the lockup period for early investors holding the stock expired.
Jobs figures next in focus
On the data front, the number of people in the US filing claims for unemployment benefits increased slightly last week.
The report came ahead of closely watched non-farm payrolls figures for July due on Friday, which will shape expectations for the Fed’s path for interest rates at a time when chairman Kevin Warsh has scaled back on forward guidance from the central bank.
Declining issues outnumbered advancers by a 1.57-to-1 ratio on the NYSE and by a 1.38-to-1 ratio on the Nasdaq.
The S&P 500 posted 29 new 52-week highs and four new lows while the Nasdaq Composite recorded 131 new highs and 82 new lows.
Volume on US exchanges was 17.09 billion shares, compared with the 17.42 billion average for the full session over the last 20 trading days.
