(Bloomberg) — Semiconductor stocks slid as rising U.S. Treasury yields drove investors to shift from growth stocks toward companies more closely tied to swings in the pace of economic growth.
Advanced Micro Devices Inc. and Nvidia Corp. were among the biggest decliners in the Philadelphia Semiconductor Index Tuesday with drops of about 5%. The index of 30-chip related companies fell as much as 2.7% and is on pace for its worst decline in more than two weeks.
Technology and health-care stocks were the two worst performing sectors in the S&P 500 as the yield on the 10-year Treasury bond climbed to 1.68%, the highest since November. Energy, financial and industrial stocks were the three best performing sectors in the benchmark.
High-growth stocks are the most susceptible to the impacts of rising bond yields since their values rely heavily on future earnings, which analysts discount into current dollars by using prevailing market rates. The higher those rates go, the smaller the current value of those earnings become.
Other big decliners in the chip index included Lattice Semiconductor Corp., which fell 6%, and ASML Holding NV, which declined more than 3%. The Philadelphia semiconductor index’s drop erased Monday’s gains, though the gauge is still up nearly 4% over the past month.
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