Dow Jones down 17 points after chipmaker stocks decline

The Dow Jones plummets after pessimistic Q3 guidance from Broadcom's CEO.

Trader calling after Dow Jones falls 17 points Source: Bloomberg

The Dow Jones tumbled after a dire forecast from Hock E. Tan, the chief executive officer (CEO) of chipmaker Broadcom. Tan said that the US-China trade war and the US ban on conducting business with Chinese electronics giant Huawei could cost the corporation $2 billion for the rest of 2019.

US-China trade war and Huawei ban weigh on chipmaker stocks

Broadcom had worse-than-expected Q2 revenue and Tan said that the US-China tariff dispute and Huawei blacklist will cut into the chipmaker’s future profits. Huawei is such an important customer to Broadcom that the semiconductor manufacturer received $900 million in revenue in 2018 from the electronics company. Tan spoke about how the trade war and Huawei ban impacted Broadcom.

‘With respect to semiconductors, it is clear that the US-China trade conflict including the Huawei export ban is creating economic and political uncertainty and reducing visibility for global OEM [original equipment manufacturer] customers,' said Tan.

'As a result, demand volatility has increased and our customers are actively reducing inventory levels to manage risk,' said Tan.

After Broadcom’s disappointing news, the company’s stock fell 5%. Other chipmakers that are dependent on China to assemble their products like Intel also had share prices decrease.

Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, noted that Wall Street is worried that the US-China trade impasse will drag on and continue to impact corporations like Broadcom.

‘Markets are really concerned that the trade war with China is not going to be resolved anytime soon,’ said Zaccarelli.

What’s next for the Dow Jones?

The concerns from Broadcom about the US-China trade war could lead investors to closely watch the US Federal Reserve’s meeting next week. Some investors want the Fed to cut interest rates to counteract the economic effects of the tariff dispute between the two nations and boost the economy.

However, there is still positive economic news like strong May retail sales that may not justify an interest rate reduction this summer. Andrew Hunter, senior US economist at Capital Economics, says that the Fed may wait until autumn to take action.

‘The retail sales data reinforce our [Capital Econonics] view that [Fed] officials are likely to wait until the September FOMC [Federal Open Market Committee] meeting before pulling the trigger [and implementing interest rate cuts],’ said Hunter.


This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

Take a position on indices

Deal on the world’s major stock indices today.

  • Trade the lowest Wall Street spreads on the market
  • 1-point spread on the FTSE 100 and Germany 30
  • The only provider to offer 24-hour pricing

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Sell
Buy
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Sell
Buy
Change
Sell
Buy
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Friday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.

All trading involves risk and losses can exceed deposits. Trading CFDs may not be suitable for everyone so please ensure that you fully understand the risks involved. All trading involves risk and losses can exceed deposits.