The S&P 500 and Nasdaq were in the red on Friday after Federal Reserve Chair Jerome Powell discussed stimulus tapering while disappointing quarterly reports from Snap Inc and Intel Corp pushed the communications and technology sectors lower.
The Dow and the S&P 500 started to lose ground after hitting record highs earlier in what became a choppy trading day.
Stocks pulled back further while Powell was speaking but went on to pare losses after hitting a session low in late morning. Powell said the US central bank was "on track" to begin reducing its purchases of assets.
"Powell's continuing on his data-driven approach and didn't appear incrementally more hawkish," said Sean Sun, portfolio manager at Thornburg Investment Management in Santa Fe, New Mexico.
But Sun said investors were "really anxious" about weaker than expected earnings at Snap, which attributed some weakness in its advertising business to global supply-chain disruptions and labor shortages that caused brands to pull back on their advertising spending.
This caused shareholders to exit other communications companies such as Facebook Inc, which was down 6%, and Twitter Inc, down 4.4%, as they also depend heavily on advertising revenue. As a result the S&P's communications services index was the biggest decliner among the benchmark's 11 major sectors, down more than 2%.
"Consumers want to open their wallets and buy things but they can't if goods are stuck on container ships. And advertisers aren't going to advertise things they can't sell," said Sun, noting that growth stocks were down in sympathy.
"Investors are now thinking about risk reward and valuations in growth stocks leave less room for disappointment." Intel was down 12% after it missed third-quarter sales expectations, while its chief executive officer pointed to shortages of chips holding back sales of its flagship processors.
By 2:26 p.m. EDT, the Dow Jones Industrial Average rose 92.07 points, or 0.26%, to 35,695.15, the S&P 500 lost 3.93 points, or 0.09%, to 4,545.85 and the Nasdaq Composite dropped 121.42 points, or 0.8%, to 15,094.28.
Still, the benchmark S&P 500 index, which boasted a record closing high on Thursday, was set for its third straight week of gains.
Eight of the S&P sector indexes were flat or gaining by late afternoon but consumer discretionary was also falling along with the technology index, which includes Intel.
The financial sector was the biggest percentage gainer with help from American Express Co, which jumped 6%, as it beat profit estimates for the fourth straight quarter.
Analysts increased their expectations for S&P 500 earnings growth for the third quarter, forecasting an increase of 34.8% year-on-year, up from an expected 31.9% rise at the beginning of the week, according to data from Refinitiv.
Data showed U.S. business activity accelerated in October, as COVID-19 infections subsided, though labor and raw material shortages held back manufacturing.
Advancing issues outnumbered declining ones on the NYSE by a 1.17-to-1 ratio; on Nasdaq, a 1.50-to-1 ratio favored decliners.
The S&P 500 posted 83 new 52-week highs and no new lows; the Nasdaq Composite recorded 126 new highs and 122 new lows.