Updates with market close

By Noel Randewich and Sruthi Shankar

May 7 (Reuters) - The S&P 500 ended lower on Thursday, with Intel and other chip stocks retreating after a recent rally, while uncertainty around U.S.-Iran peace talks weighed on the wider market.

U.S.-listed shares of Arm Holdings ARM.O tumbled as worries about the company's ability to secure sufficient supplies for its new AI chip overshadowed a strong earnings forecast.

Intel INTC.O and Advanced Micro Devices AMD.O declined, giving back some of their gains from earlier this week.

The PHLX chip index .SOX dropped, trimming its gain so far this quarter to around 46%.

The United States and Iran were edging toward a temporary agreement to halt their war, sources and officials said, with Tehran reviewing a proposal that would stop the fighting but leave the most contentious issues unresolved.

"You can have a string of days like this, and that's not going to take away from the fact that this has been a rip-roaring quarter of recovery, driven by fundamentals," said Mike Dickson, head of portfolio management at Horizon Investments in Charlotte, North Carolina.

Oil prices LCOc1, CLc1 edged lower, trading around $100 per barrel. O/R

Nvidia NVDA.O and Microsoft MSFT.O both climbed, underscoring investor confidence in Wall Street's heavyweight AI companies.

According to preliminary data, the S&P 500 .SPX lost 29.46 points, or 0.40%, to end at 7,335.66 points, while the Nasdaq Composite .IXIC lost 32.75 points, or 0.15%, to 25,801.20. The Dow Jones Industrial Average .DJI fell 313.34 points, or 0.64%, to 49,597.25.

A relentless rally in technology and AI shares has helped push U.S. stocks to record highs in recent days as investors cheer signs of strong demand for artificial intelligence and a robust earnings season. S&P 500 companies are on track for their strongest profit growth in more than four years.

Upbeat economic readings in recent weeks have also helped allay concerns about the economy.

Data showed the number of Americans filing claims for unemployment benefits rose less than expected last week.

After a strong private payrolls report on Wednesday, investors are awaiting more comprehensive nonfarm payrolls data on Friday, with jobs seen increasing by 62,000 in April after rebounding 178,000 in March, according to a Reuters poll of economists.

Traders continued to bet the U.S. Federal Reserve would hold interest rates steady through the end of the year due to a resilient labor market and elevated energy prices.

Cleveland Fed President Beth Hammack said she expects the central bank to hold interest rates steady well into the future as it navigates a climate of considerable uncertainty.

Datadog DDOG.O climbed after the cybersecurity company raised its full-year earnings forecast. CrowdStrike CRWD.O and Palo Alto Networks PANW.O also gained.

Whirlpool WHR.N slumped after the home-appliance maker missed first-quarter sales estimates and suspended its dividend.

Declining stocks outnumbered rising ones within the S&P 500 .AD.SPX by a 1.7-to-one ratio.

The S&P 500 posted 18 new highs and 10 new lows; the Nasdaq recorded 126 new highs and 83 new lows.