US STOCKS-S&P 500, Nasdaq dip with economic data, earnings in focus

By Sinéad Carew and Twesha Dikshit

Feb 10 (Reuters) - The S&P 500 and the Nasdaq edged down on Tuesday while the Dow notched a fresh record high as investors digested disappointing retail sales figures and waited for a key labor market report.

The S&P 500 communication services sector .SPLRCL was weighed down by a 1.5% drop in Alphabet GOOGL.O shares, creating the biggest drag for the S&P 500, after Google's parent said it sold bonds worth $20 billion.

The announcement came as investors have been worrying about the amount of money technology companies say they must spend to support the artificial-intelligence boom, with Amazon AMZN.O, Alphabet, Meta META.O and Microsoft MSFT.O collectively set to spend hundreds of billions in 2026 as they race for AI dominance.

Meanwhile, U.S. retail sales unexpectedly stalled in December as households scaled back spending on vehicles and other big-ticket items, suggesting a slower growth path for consumer spending and the economy heading into the new year. The flat reading compared with economist estimates for 0.4% growth.

Trader hopes were raised slightly for a more dovish Federal Reserve with the probability of a one-notch April rate cut up to 36% from 32.2% on Monday, according to CME Group's FedWatch tool. Markets still expect, however, that the central bank will keep rates on hold until June, when President Donald Trump's Fed chair nominee, Kevin Warsh, would take charge if approved by the U.S. Senate.

Mark Luschini, chief investment strategist at Janney Montgomery Scott, described the disappointing retail data as "bad news is good news," particularly for rate-sensitive industry indexes such as utilities .SPLRCU and real estate .SPLRCR, which were leading the benchmark's sector gainers.

But the strategist pointed to caution ahead of the delayed but closely watched nonfarm payrolls report, due on Wednesday.

"In anticipation of the jobs report, nobody wants to get too far above their risk budget in the event the number does cause some consternation," said Luschini.

Potentially adding some angst was White House economic adviser Kevin Hassett's comment on Monday that U.S. job gains could be lower in the coming months because of slower labor force growth and higher productivity due to AI gains.

At 2:33 p.m. EST, the Dow Jones Industrial Average .DJI rose 121.50 points, or 0.24%, to 50,257.37, the S&P 500 .SPX lost 3.77 points, or 0.05%, to 6,961.05 and the Nasdaq Composite .IXIC lost 52.09 points, or 0.22%, to 23,186.58.

With the S&P 500 narrowly missing a return to its late January record close on Monday, Janney's Luschini said: "When a security or an index reapproaches a high level again there's often some hesitation, some contention that has to take place before it can break through that peak again."

Gains of 3% in Walt Disney DIS.N and more than 2% in Home Depot HD.N helped propel the blue-chip Dow to a fresh peak, against a drag from Coca-Cola KO.N, which fell 1.3% after missing Wall Street estimates for fourth-quarter revenue.

But trading in software stocks was choppy after last week's rout, with the S&P 500 software index .SPLRCIS paring earlier gains of more than 2%. It was last up just 0.4%.

In that space, however, Datadog DDOG.O shares jumped 14% after the cloud-based monitoring and analytics platform beat quarterly estimates.

In the consumer discretionary .SPLRCD sector, Marriott MAR.O was leading gains, up 9% after hitting a record high. The hotel chain projected a 35% jump in fees from co-branded credit cards, as affluent travelers splurge on luxury vacations.

Shares of S&P Global SPGI.N dipped 8.8% after forecasting 2026 profit below analysts' estimates. Peers Moody's MCO.N and MSCI MSCI.N also fell.

Spotify SPOT.N shares soared 15.7% after the audio-streaming platform forecast first-quarter earnings above expectations, benefiting from strong user growth and price hikes.

Advancing issues outnumbered decliners by a 1.66-to-1 ratio on the NYSE where there were 689 new highs and 60 new lows. On the Nasdaq, 2,566 stocks rose and 2,107 fell as advancing issues outnumbered decliners by a 1.22-to-1 ratio.

The S&P 500 posted 66 new 52-week highs and 11 new lows while the Nasdaq Composite recorded 99 new highs and 88 new lows.