Stocks slip as investors eye chipmakers, Chewy IPO

Emily McCormick
·Reporter

U.S. stocks were mixed Friday amid new economic data gauging the health of the U.S. and Chinese economies. Meanwhile, chipmakers broadly declined following a disappointing outlook from Broadcom (AVGO).

The S&P 500 (^GSPC) fell 0.16%, or 4.62 points, as of market close. The Dow (^DJI) edged down 0.06%, or 16.96 points, while the Nasdaq (^IXIC) fell 0.52%, or 40.47 points.

Reports of a pick-up in May U.S. retail sales and industrial production Friday morning did little to stem stocks’ downward trend. U.S. retail sales rose 0.5% last month, just under the 0.6% increase expected, while April’s sales were upwardly revised from a 0.2% decline to a 0.3% increase. Excluding volatile auto and gas sales, retail sales rose a better-than-expected 0.5% in May, according to the Census Bureau.

Meanwhile, U.S. industrial production rose at a quicker pace than expected in May. The Federal Reserve reported an increase of 0.4% in industrial production for the month, reversing a decline of the same magnitude in April. This was better than the 0.2% rise in May industrial production consensus economists expected.

Overnight, new data from China’s National Bureau of Statistics showed softening in both industrial output and investment in the region amid ongoing trade tensions with the U.S.

Chinese industrial output growth was 5% in May, down 0.4 percentage points from the month prior and marking the slowest rate of increase since 2002.

Fixed-asset investment grew 5.6% in May, which also represented a slowdown from the four months prior and a miss compared to consensus expectations. Private sector fixed-asset investment, which comprises nearly two-thirds of total investment in China, rose 5.3%, versus a 5.5% increase in the first four months of 2019.

Meanwhile, chipmakers’ stocks on Friday saw renewed weakness after Broadcom cut its annual sales forecast Thursday, citing weaker order demand due to the U.S.-China trade war. The company now sees revenue of $22.5 billion in the 2019 fiscal year, versus the $24.5 billion guidance it provided three months ago.

“With respect to semiconductors, it is clear that the U.S.-China trade conflict including the Huawei export ban is creating economic and political uncertainty and reducing visibility for global OEM [original equipment manufacturer] customers,” Broadcom CEO Hock E. Tan said during a call with analysts Thursday. “As a result, demand volatility has increased and our customers are actively reducing inventory levels to manage risk.”

Broadcom also disclosed that sales to Chinese smartphone-maker Huawei alone contributed $900 million in revenue for the company, or about 4.3% of total fiscal 2018 revenue.

Shares of Broadcom fell more than 5.5% as of market close Friday.

Other U.S. chipmakers including Advanced Micro Devices (AMD) and Nvidia (NVDA) also fell as investors weighed the sector-wide impact of the U.S.-China trade tensions. The iShares PHLX Semiconductor ETF (SOXX) declined 2.5% Friday.

IPO market

The U.S. IPO market continues to fire on all cylinders.

Online pet-product retailer Chewy (CHWY) became the latest company to hit the public markets on Friday. Shares of the Dania Beach, Florida-based company jumped 64% above their IPO pricing to open at $36.00 each. Shares closed at $34.99 Friday, or 59% above their IPO price.

This comes after the company on Thursday priced its IPO at $22 per share, above its originally targeted range. The company sold 46.5 million shares, bringing the size of its IPO raise to $1.02 billion.

[Read more: Chewy shares surge in public debut]

In fiscal 2018, Chewy reported revenues of $3.5 billion, up 67% from the year prior. It posted a net loss of $267.9 million for the year ending February 2019, albeit smaller than the $338.1 million loss from year ending January 2018. PetSmart, a closely held company, acquired Chewy in 2017 for a reported $3.35 billion and continues to be a majority shareholder in the company.

Chewy’s public debut closely follows those of gig economy software platform Fiverr (FVRR) and Thursday and cybersecurity company CrowdStrike (CRWD) earlier this week. Both have seen shares nearly double from their IPO pricing, as of market close Friday.

Other newly public companies this year have been similarly successful. Video conferencing software company Zoom (ZM) has seen shares nearly tripled from its IPO pricing, while Beyond Meat (BYND) shares have skyrocketed 466%. The Renaissance Capital IPO ETF (IPO), which tracks a basket of newly listed public companies, has risen 35% for the year-to-date, or more than double the gains of the S&P 500.

The high-profile IPOs of ride-hailing companies Uber and Lyft have been the exceptions. Shares of both companies have come under continuous pressure and traded below their IPO prices as of market close Thursday.

Read the latest financial and business news from Yahoo Finance

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Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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