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Stocks are dragged down by chipmakers and U.S.-China trade fears

IRVINE, CA, THURSDAY, MAY 28, 2015 - Broadcom Corp. has agreed to be acquired by Avago Technologies
Irvine-based Broadcom’s share price dropped sharply after it warned that demand for chips has slumped because of restrictions on sales to Chinese technology firms and hesitation among customers to place new orders.
(Robert Gauthier / Los Angeles Times)

Stocks ended a choppy week of trading with modest losses Friday as investors look forward to getting more clues about the direction of interest rates.

Technology shares drove the declines, and energy stocks also fell a day after leading the market. Some late-day gains in banks and insurers helped temper the market’s losses.

Investors dealt with fresh concerns about the effect on businesses from the U.S. trade dispute with China. The chipmaker Broadcom warned that demand for chips has slowed because of U.S. restrictions on sales to Chinese technology firms and hesitation among customers to place new orders. The company shaved $2 billion from its annual revenue forecast.

The S&P 500 index fell 4.66 points, or 0.2%, to close at 2,886.98 Friday. The index ended the week with a slim gain of 0.5%. The Dow Jones Industrial Average dropped 17.16 points, or 0.1%, to 26,089.61. The Nasdaq composite slid 40.47 points, or 0.5%, to 7,796.66.

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The major indexes are still showing strong gains for June — the Dow is up 5.1% and the S&P 500 is up 4.9%.

The Federal Reserve holds its next meeting of policyholders next week. No action on rates is expected, but the futures market indicates that investors are almost certain the Fed will cut rates at its July meeting, so they’ll carefully parse a statement from the central bank and comments from Fed Chair Jerome H. Powell on Wednesday.

Economists Ethan Harris and Aditya Bhave of Bank of America Merrill Lynch wrote in a note to clients that they expect Fed officials to wait until the second week of July to indicate whether they intend to cut rates, after seeing the next government report on the jobs market and other economic data. They’ll also know the results of an important meeting of the G-20 in late June, where President Trump and Chinese President Xi Jinping could meet and try to negotiate a deal on trade.

Chipmakers were the big decliners on Friday. Broadcom, which gets about half its revenue from China, fell 5.6%. Texas Instruments also gets nearly half its revenue from China, according to markets research company FactSet, and it shed 3.5%.

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Energy stocks fell, giving back some of the strong gains from Thursday, as a suspected attack on two oil tankers in the Strait of Hormuz added uncertainty. Oil rig operator Noble Energy dropped 5%.

Facebook rose 2.2%. The social media company has reportedly enlisted some key backers for its upcoming cryptocurrency.

Utility stocks were among the biggest gainers. That’s typically a sign that investors are worried about economic growth and shifting money into safer holdings.

Friday closed out another good week for initial public offerings. PetSmart removed the leash from its online pet products company Chewy, which surged 59% in its debut. Cloud-computing security company CrowdStrike jumped about 70% on its first day of trading Wednesday. Plant-based meat alternative company Beyond Meat nearly tripled in value on its first day of trading in May and at Friday’s close of $150.13 is six times higher than its initial offering price.

Renaissance Capital, a provider of institutional research and exchange-traded funds, has seen a 34% gain in its IPO ETF so far this year. That’s outpacing the 15% gain in the broader S&P 500.

In other trading, benchmark crude oil rose 0.4% to settle at $52.51 a barrel. Brent crude oil, the international standard, added 1.1% to close at $62.01 a barrel.

Gold edged up 0.1% to $1,344.50 per ounce, and silver lost 0.6% to $14.80 per ounce.

The dollar rose to 108.55 Japanese yen from 108.34 yen on Thursday. The euro weakened to $1.1207 from $1.1279.

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