What Happened?
Shares of analog chips maker onsemi (NASDAQ: ON) jumped 6.2% in the afternoon session after Federal Reserve Chair Jerome Powell's remarks hinted at potential interest rate cuts, sparking a broad market rally. Powell's speech at the Jackson Hole Economic Symposium increased investor confidence that the central bank could lower interest rates in the coming months. This positive sentiment fueled a broad rally on Wall Street, with the S P 500 and the tech-heavy Nasdaq composite showing strong gains. The semiconductor sector was a significant beneficiary of the market's optimism, as the prospect of lower borrowing costs is generally favorable for growth-oriented technology companies, lifting shares across the industry.
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What Is The Market Telling Us
onsemi’s shares are very volatile and have had 29 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 9 days ago when the stock gained 3% on the news that the semiconductor sector continued to rally as a favorable July inflation report boosted investor confidence for a potential Federal Reserve interest rate cut in September. Lower-than-expected inflation data for July increased market expectations for a Federal Reserve interest rate cut next month, with futures markets pricing in a 96.2% probability. A potential rate cut lowers borrowing costs, which is particularly beneficial for growth-oriented sectors like technology and semiconductors as it can fuel investment and expansion.
onsemi is down 15.6% since the beginning of the year, and at $52.10 per share, it is trading 33.1% below its 52-week high of $77.87 from August 2024. Investors who bought $1,000 worth of onsemi’s shares 5 years ago would now be looking at an investment worth $2,436.
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