Wall St stalls as chips retreat after record run; jobs data in focus

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By Sruthi Shankar and Utkarsh Hathi

May 7 (Reuters) – U.S. stocks edged down from record highs hit earlier in Thursday’s session, pressured by a pullback in chipmakers following a recent rally, while investors awaited developments in U.S.-Iran peace talks as well as Friday’s employment numbers.

The S&P 500 and the Nasdaq touched fresh peaks in morning trading, helped by a decline in oil prices amid optimism that an agreement between Washington and Tehran could ease tensions and ease global crude supply.

However, stocks dipped as the day wore on, with heavyweight chip majors dragging on the main indexes.

U.S.-listed shares of Arm Holdings slid 10.8% as worries about the company’s ability to secure sufficient supplies for its new AI chip overshadowed a strong earnings forecast.

The Philadelphia SE Semiconductor index fell more than 2%, having jumped almost 60% so far this year.

“The markets are just waiting for news (out of Iran) and obviously the big jobs number tomorrow,” said Phil Blancato, chief market strategist at Osaic Wealth in New York.

“The earnings season has been excellent. Despite higher costs of fuel, we’re still seeing a market that’s very resilient and wanting to go higher. If we get a positive announcement on the war, it’s going to go much higher.”

The United States and Iran are edging toward a temporary agreement to halt their war, sources and officials said on Thursday, with Tehran reviewing a proposal that would stop the fighting but leave the most contentious issues unresolved.

Oil prices fell 3%, bouncing off session lows in volatile trading. [O/R]

The S&P 500 energy led declines among the major sectors with a 2.3% drop.

At 12:17 p.m. ET, the Dow Jones Industrial Average fell 176.08 points, or 0.35%, to 49,734.51. The S&P 500 lost 22.39 points, or 0.30%, to 7,343.95, and the Nasdaq Composite shed 41.02 points, or 0.16%, to 25,797.93.

A relentless rally in technology and AI shares has helped push U.S. stocks to fresh peaks this year as investors cheered signs of strong demand for artificial intelligence and a robust earnings season.

Upbeat economic readings in recent weeks have also helped allay concerns of slowing growth.

Data showed the number of Americans filing claims for unemployment benefits rose less than expected last week amid low layoffs that are helping anchor the labor market.

After a strong private payrolls report on Wednesday, investors are awaiting the more comprehensive nonfarm payrolls numbers on Friday, with jobs seen increasing by 62,000 in April after rebounding 178,000 in March, according to a Reuters poll of economists.

Traders continued to bet the U.S. Federal Reserve would hold interest rates steady through the end of the year due to a resilient labor market and elevated energy prices.

Cleveland Fed President Beth Hammack said she expects the central bank to hold interest rates steady well into the future as it navigates a climate of considerable uncertainty.

In other movers, cybersecurity stocks surged after Datadog raised its full-year earnings forecast. Datadog surged 28%, while peers CrowdStrike and Palo Alto Networks added 6.9% and 6.3%, respectively.

Whirlpool slumped 12.5% after the home-appliance maker missed first-quarter sales estimates and suspended its dividend.

Declining issues outnumbered advancers by a 1.38-to-1 ratio on the NYSE and by a 1.46-to-1 ratio on the Nasdaq.

The S&P 500 posted 17 new 52-week highs and nine new lows, while the Nasdaq Composite recorded 115 new highs and 66 new lows.

(Reporting by Sruthi Shankar and Utkarsh Hathi in Bengaluru; Editing by Pooja Desai)