US STOCKS-Wall St mixed as tech retreats; defense firms gain on Trump's budget hike call

By Purvi Agarwal and Nikhil Sharma

Jan 8 (Reuters) - The S&P 500 was muted on Thursday as losses in heavyweight technology stocks offset broader gains, while defense companies advanced after President Donald Trump called for a $1.5 trillion military budget.

Technology stocks on the S&P 500 .SPLRCT lost 1.8%, with Nvidia NVDA.O, Apple AAPL.O, Microsoft MSFT.O, and Broadcom AVGO.O down between 1% and 3%. They also weighed on the Nasdaq.

Out of the 11 S&P 500 sectors, technology was the only other sector alongside healthcare .SPXHC trading lower.

The S&P 500 consumer staples .SPLRCS sector led gains, up 2.2%, with Costco Wholesale COST.O rising 5.3% after Deutsche Bank resumed coverage of the stock with a "buy" rating. Home Depot HD.N and McDonald's MCD.N were the biggest boosts to the Dow.

Alphabet GOOGL.O gained 1.6% after the Google-parent on Wednesday surpassed Apple in market capitalization for the first time since 2019, becoming the second-most valuable U.S. company.

Joe Saluzzi, partner and co-founder at Themis Trading, said investors might be repositioning their holdings, so tech stocks are underperforming. However, it was "too soon" to call it a broadening of the market rally beyond tech stocks.

At 12:00 p.m. ET, the Dow Jones Industrial Average .DJI rose 303.83 points, or 0.62%, to 49,299.91, the S&P 500 .SPX gained 3.51 points, or 0.05%, to 6,924.44 and the Nasdaq Composite .IXIC lost 113.93 points, or 0.49%, to 23,469.09.

Defense stocks gained following Trump's statement that the 2027 U.S. military budget should be $1.5 trillion, significantly higher than the $901 billion approved by Congress for 2026.

RTX RTX.N gained 1.2%, Lockheed Martin LMT.N was up 4.7%, Northrop Grumman NOC.N inched 3.4% higher and Kratos Defense KTOS.O advanced 17.3%. The S&P 500 aerospace and defense sub-index .SPLRCAERO hit an all-time high, while the Arca Defense index .DFII was up 4%.

Defense stocks rebounded after falling on Wednesday following Trump's threat to block defense contractors from paying dividends or buying back shares until they speed up weapons production.

"The defense budget is growing, if anything. Sure you're getting a little bit more pressure from the administration to do things a certain way, but investors don't seem to care about at this point," said Saluzzi.

The day's moves follow Wall Street's main indexes' mixed session on Wednesday, where the S&P 500 and the Dow pulled back from their record highs to end lower, while the Nasdaq .IXIC stood firm on investor optimism around AI-related stocks.

Meanwhile, the number of Americans filing new applications for unemployment benefits rose moderately last week, though demand for labor remained sluggish, supporting Wednesday's ADP employment and JOLTS figures .

The focus this week will be on Friday's crucial nonfarm payrolls report for December, which would be among the first reliable datasets after the longest U.S. shutdown in history.

Fitch raised its U.S. growth outlook, estimating GDP expanded 2.1% in 2025 and forecasting 2.0% growth in 2026 after incorporating economic data delayed by last year's government shutdown.

Memory chipmakers lost ground after a stellar rally. SanDisk SNDK.O fell 10.5%, while Western Digital WDC.O and Seagate STX.O were off about 9% each.

Ford F.N gained 5% after Piper Sandler upgraded the automaker to "overweight" from "neutral".

Advancing issues outnumbered decliners by a 1.61-to-1 ratio on the NYSE and by a 1.13-to-1 ratio on the Nasdaq.

The S&P 500 posted 37 new 52-week highs and 13 new lows, while the Nasdaq Composite recorded 101 new highs and 38 new lows.