Stocks started the day down over 100 points, then rallied to the positive before closing slightly down. The Dow finished down 17 points to close the week at 26,089, and the NASDAQ was down significantly more due to chip stocks and their concern regarding Broadcom’s earnings. The markets recovered on optimism as industrial production increased 0.4% in May, and the consumer continues to show strength with retail sales also increasing 0.5% in May, the largest monthly increase in 2019.
Broadcom reported a cautious and conservative forecast yesterday after the market close, causing their stock to open about 8% lower today, and also bringing the other chip stocks down with it. Broadcom had $900 million in sales with Huawei last year, which makes them particularly affected by trade talks with China and the ban on Huawei. Even though their revenues were up 10% year over year, earnings grew and beat expectations, free cash flow was up 20% from previous year and they still expect to grow free cash flow by double digit percentages this year and profit margins increased, the markets still punished them as they grew cautious about future revenues due to the Huawei ban. Regardless, they still feel financially strong as they plan to buy back $8 billion worth of shares and will still pay a quarterly dividend of $2.65, which is about a 4% yield.
PetSmart’s online division, Chewy, went IPO today. Shares were initially priced at $22, but when trading opened, they had already risen to $36 a share. Chewy has been growing rapidly as revenue has increased sharply, going from $26 million in 2012 to $3.5 billion in 2018. PetSmart bought Chewy in 2017 for $3 billion and will still hold 70% of outstanding shares.