© Reuters. FILE PHOTO: Traders work on the floor at the NYSE in New York

By Shreyashi Sanyal

(Reuters) – U.S. stocks dropped on Friday, as shares of chipmakers sank on a warning from sector major Broadcom (NASDAQ:) 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 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.

Shares of Apple Inc (NASDAQ:) also slipped 0.85% and weighed the most on the S&P 500 and the Nasdaq. 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 lower, with the Philadelphia Semiconductor index 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 fell 0.83%, the most among the 11 major S&P sectors. The trade-sensitive industrials slipped 0.54%, with 3M (NYSE:) Co weighing on the sector. Shares 3M also added to pressure on the Dow.

At 13:08 p.m. ET the 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 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 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 (NASDAQ:) and Uber Technologies (NYSE:) Inc 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.

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