Semiconductor stocks fell as rising U.S. Treasury yields drove investors to shift from growth stocks to companies more closely tied to swings in the pace of economic growth.
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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 by 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 went to 1.68%, the highest since November. Energy, financial and industrial stocks were the three best performing sectors in the benchmark.
Since their values rely heavily on the future earnings, analysts discount into current dollars by using current market rates, high-growth stocks are the most susceptible to the impact of rising bond yields. The higher the rates go, the smaller the current value of those earnings becomes.
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, but the gauge is still up nearly 4% over the past month.
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