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Wall Street drops as Broadcom warning hits chip stocks

Credit: REUTERS/Brendan McDermid

U.S. stocks dropped on Friday, as shares of chipmakers sank on a warning from sector major Broadcom of a broad weakening in global demand and Chinese data pointed to the worst slowdown in industrial growth in 17 years.

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Broadcom slides after warning of chip demand slowdown

Tech down most among 11 major S&P sectors; Chips tumble

China's May industrial output growth slows to 17-yr low

Data shows U.S. retail sales rise in May

Indexes down: Dow 0.14%, S&P 0.25%, Nasdaq 0.54%

Updates to early afternoon

By Shreyashi Sanyal

June 14 (Reuters) - U.S. stocks dropped on Friday, as shares of chipmakers sank on a warning from sector major Broadcom of a broad weakening in global demand and Chinese data pointed to the worst slowdown in industrial growth in 17 years.

Shares of Broadcom Inc AVGO.O fell 6.53% after it cut its full-year revenue forecast by $2 billion, blaming the U.S.-China trade conflict and export curbs on Huawei Technologies Co Ltd HWT.UL.

Shares of Apple Inc AAPL.O also slipped 0.85% and weighed the most on the S&P 500 .SPX and the Nasdaq .IXIC. Broadcom is a major supplier to the iPhone maker.

"This is driven by the lack of agreement with China. Everyone knows that if and when this deal gets done, there is going to be a positive reaction from semiconductors," said Kevin Miller, chief investment officer at E-Valuator Funds in Minneapolis, Minnesota.

Losses in chip companies, who both source product and sell heavily in China, dragged the benchmark S&P 500 index .SPX lower, with the Philadelphia Semiconductor index .SOX tumbling 2.80%.

"People are backing off of optimism that a trade deal will get done and it'll probably drag out longer into the year," said Ryan Nauman, market strategist at Informa Financial Intelligence in Zephyr Cove, Nevada.

Earlier in the day, global stocks fell after China's industrial output growth in May slowed below expectations and showed signs of weakening demand.

Technology stocks .SPLRCT fell 0.83%, the most among the 11 major S&P sectors. The trade-sensitive industrials .SPLRCI slipped 0.54%, with 3M Co MMM.N weighing on the sector. Shares 3M also added to pressure on the Dow .DJI.

At 13:08 p.m. ET the Dow Jones Industrial Average was down 37.50 points, or 0.14%, at 26,069.27, the S&P 500 was down 7.34 points, or 0.25%, at 2,884.30 and the Nasdaq Composite was down 42.55 points, or 0.54%, at 7,794.58.

The S&P 500 index has so far gained 4.8% in June and was on track to record a second straight week of gains on hopes the Federal Reserve will soon cut interest rates.

A Fed meeting next week may provide the acid test of market expectations that the U.S. central bank could cut rates as much as three times this year, while a G20 summit at the end of the month may yet yield more progress on a trade deal.

In a bright spot, data showed U.S. retail sales increased in May and sales for the prior month were revised higher, suggesting a pick-up in consumer spending that could ease fears the economy was slowing down sharply in the second quarter.

Online pet products retailer Chewy Inc CHWY.N rose 63% in its market debut on Monday, at a valuation of over $14 billion and joined a host of high-profile companies, such as Lyft Inc LYFT.O and Uber Technologies Inc UBER.N that listed on U.S. stock exchanges this year.

Declining issues outnumbered advancers for a 1.70-to-1 ratio on the NYSE and a 1.94-to-1 ratio on the Nasdaq.

The S&P index recorded 27 new 52-week highs and two new lows, while the Nasdaq recorded 37 new highs and 64 new lows.

(Reporting by Shreyashi Sanyal and Aparajita Saxena in Bengaluru; Editing by Patrick Graham and Arun Koyyur)

((Shreyashi.Sanyal@thomsonreuters.com; +1 646 223 8780 ; Reuters Messaging: Shreyashi.Sanyal.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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