Johnny Rice, The Motley Fool
3 min read
In This Article:
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Wolfspeed's stock has declined roughly 60% this month as trouble mounts.
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Poor job numbers and continued pressure from the White House are giving investors hope that interest rates will be lowered.
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This could allow Wolfspeed to refinance its significant debt, but it may be too little, too late.
Shares of Wolfspeed (NYSE: WOLF) are spiking on Wednesday. The chipmaker's stock was up 17.2% as of 2:21 p.m. ET, as the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) were up 0.2% and 0.4%, respectively.
Wolfspeed's stock is recovering somewhat today after losing nearly 60% this month. The stock may be getting a boost from President Trump as he continues to pressure the Federal Reserve to lower interest rates.
The payroll processing firm ADP reported its private-sector job creation numbers on Wednesday. The 37,000 jobs added in May were the lowest figure reported since March 2023 and significantly lower than the Dow Jones forecast of 110,000. While the ADP report is important, the nonfarm payrolls count from the Bureau of Labor Statistics, released in two days, is the more closely watched metric.
Regardless, President Trump took to Truth Social to call on Federal Reserve Chairman Jerome Powell to lower interest rates, saying, "Powell must now LOWER THE RATE. He is unbelievable!!!"
While the president does not have the legal authority to direct the Fed to lower rates, and Powell has fiercely maintained its independence, it's not impossible that the continued pressure in the face of poor hiring numbers will lead to rate cuts. It appears some investors are hoping that will be the case.
The struggling chipmaker is heavily indebted and teetering on the brink of bankruptcy. Lowered interest rates could allow the company to refinance its debt at a lower rate and possibly avoid such a fate. However, while the possibility exists, it seems unlikely to me that rates would lower enough or in time to save Wolfspeed given its dire situation. I would avoid this stock.
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