US Stocks-Nasdaq lags on angst over AI spending ahead of earnings reports

Also providing some relief, crude oil futures fell more than 3% while traders booked profits from a massive rally in the last five sessions and after sources said China was pushing to resume stalled U.S.-Iran peace talks. Still, U.S. missiles struck targets across Iran after President Donald Trump vowed "major military punishment" for Tehran and its Houthi allies in Yemen.

"Whatever the headlines are involving the conflict right now, that drives oil and then oil drives financial markets," said Andersen, adding that swings in oil prices can impact consumer and corporate spending.

Also, the Trump administration imposed new tariffs of 10% and 12.5% on goods from 60 trading partners, citing lax enforcement of forced-labor bans. The move came as a temporary 10% global tariff expired.

Friday's data showed that activity in the U.S. services sector accelerated in July, aided in part by spending around the FIFA World Cup and the Independence Day holiday, while the pace of growth in the manufacturing sector eased to the slowest since March.