Reuters US Top
By Johann M Cherian and Noel Randewich
(Reuters) -The S&P 500 fell from record highs on Friday, with losses in Dell, Nvidia and other AI-related stocks, while investors parsed inflation data showing tariffs have started feeding into prices.
Dell tumbled 9.4% and was among the deepest decliners in the S&P 500 after high manufacturing costs for AI-optimized servers and intensifying competition overshadowed the company's bullish demand forecast for artificial intelligence infrastructure. The S&P 500 technology sector index shed 1.7%.
Nvidia lost 3.3%, down for a third straight day. The AI heavyweight's quarterly report on Wednesday fell short of investors' high expectations but confirmed that spending related to artificial intelligence infrastructure remains strong.
"Today is just weakness in the top of the market, in tech," said Zachary Hill, head of portfolio management at Horizon Investments in Charlotte, North Carolina. "This is not the first time that we've had some worries about over-investment in AI, lack of monetization opportunities and that type of thing."
U.S. consumer spending increased by the most in four months in July while services inflation picked up, but economists did not believe the signs of strong domestic demand would prevent the Federal Reserve from cutting interest rates next month against a backdrop of softening labor market conditions. The report from the Commerce Department on Friday showed mild price pressures from tariffs on imports.
A U.S. tariff exemption for package imports valued under $800 also ended on Friday, raising costs for businesses and, in turn, consumers.
Traders widely expect the Fed will cut interest rates by 25 basis points at its September meeting.
"Even if we see an uptick in inflation, which it looks like we are, the Fed may look past that, given that this is going to be tariff-related and temporary," said Jim Smigiel, chief investment officer at SEI.
The U.S. stock market will be closed on Monday for the Labor Day holiday.
Expectations of interest rate cuts have helped put the benchmark S&P 500 and the blue-chip Dow on track for their fourth straight month of gains, while the tech-heavy Nasdaq was poised to log its fifth consecutive monthly rise.
U.S. shares of Alibaba soared 13% and were among the most traded on Wall Street after the Chinese company reported stronger-than-expected quarterly growth in its cloud computing business, driven by AI-related demand.
The S&P 500 was down 0.68% at 6,457.45 points after notching a record-high close on Thursday.
The Nasdaq declined 1.18% to 21,448.87 points, while the Dow Jones Industrial Average was down 0.27% at 45,513.35 points.
Fed Governor Christopher Waller, a candidate for the central bank's top job, said on Thursday he wants to start cutting rates next month, in line with President Donald Trump's calls to lower borrowing costs.
The Russell 2000 index of smaller companies dipped 0.6% on Friday and was on track for a nearly 7% gain in August.
A court hearing on Trump's attempt to fire Federal Reserve Governor Lisa Cook ended on Friday with no immediate ruling from the judge hearing the unprecedented legal fight, meaning the U.S. central bank policymaker will remain in place for now.
Chipmaker Marvell slumped 18% after forecasting quarterly revenue below expectations.
Global economy bellwether Caterpillar lost about 4%, a day after the heavy-equipment maker forecast higher tariff-related expenses for 2025.
Advancing issues outnumbered falling ones within the S&P 500 by a 1.2-to-one ratio.
The S&P 500 posted 21 new highs and no new lows; the Nasdaq recorded 68 new highs and 61 new lows.
(Reporting by Johann M Cherian and Sanchayaita Roy in Bengaluru, and by Noel Randewich in San Francisco; Editing by Devika Syamnath and Matthew Lewis)
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