The S&P 500 ended down 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 almost 9% 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.
Nvidia dipped 3.4%, 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."
S&P 500 components so far in 2025
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 helped lead the benchmark S&P 500 and the blue-chip Dow to their fourth straight month of gains, while the tech-heavy Nasdaq logged 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. As well, the Wall Street Journal reported that Alibaba has developed a new AI chip.
The S&P 500 declined 0.64% to end the session at 6,460.26 points a day after notching a record-high close.
The Nasdaq declined 1.15% to 21,455.55 points, while the Dow Jones Industrial Average declined 0.20% to 45,544.88 points.
Six of the 11 S&P 500 sector indexes rose, led by healthcare, up 0.73%, followed by a 0.64% gain in consumer staples. The S&P 500 technology index fell 1.63%.
The Russell 2000 index of smaller companies dipped 0.5%, and it logged a 7% gain in August.
For the month, the S&P 500 rose 1.9%, the Dow rose 3.2% and the Nasdaq added 1.6%.
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.
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 almost 19% after forecasting quarterly revenue below expectations.
Global economy bellwether Caterpillar dropped 3.65% 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 1.3-to-one ratio.
The S&P 500 posted 21 new highs and no new lows; the Nasdaq recorded 76 new highs and 67 new lows.
Volume on U.S. exchanges was relatively light, with 14.8 billion shares traded, compared to an average of 16.4 billion shares over the previous 20 sessions.
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