Chipmakers Are Heading Toward Worst Week Since 2016
(Bloomberg) -- Semiconductor stocks are on track for their biggest weekly percentage loss in more than three years as a weak growth outlook from Intel Corp. further pressured a sector already rattled by a resurgence of trade uncertainty.
The Philadelphia Semiconductor Index dropped as much as 3% on Thursday, on track for its fourth consecutive decline. The industry benchmark has dropped as much as 7.7% thus far this week; closing with a decline of that magnitude would represent its biggest weekly drop since January 2016.
Intel has been one of the biggest drags on the group. On Thursday, it fell 6.3% after long-term forecasts indicated growth may be tepid for years. Shares of the Dow component were on track for their fourth straight daily drop, as well as their 12th decline of the past 13 trading days.
More broadly, semiconductor companies were pressured by the apparent rise of trade tensions between the U.S. and China. Both countries have signaled hardening positions in recent days, and President Donald Trump said that China “broke the deal” by backsliding on prior commitments. Trump also threatened an escalation of tariffs earlier this week.
Semiconductor companies have a heavy correlation to trade issues, in part because the companies rely on China for their supply chains. Also, they derive a hefty portion of their revenue from the country.
Among other factors that have weighed on the group, a weak outlook from Microchip Technology Inc. earlier this week was seen as eroding hopes that the semiconductor sector would see a rebound in demand later this year.
©2019 Bloomberg L.P.