Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More
Shares of the electric vehicle maker Lucid Group (LCID -7.09%) were sliding today on no company-specific news. Instead, investors were likely reacting to the broad market indexes, which were declining on renewed fears that the Federal Reserve will continue hiking interest rates to fight inflation.
The EV stock was down by 7.2% as of 3:56 p.m. ET.
After some initial optimism last week, investors once again returned to their pessimism about the market as they considered recent comments made by Federal Reserve Chair Jerome Powell.
Image source: Lucid.
While Powell hinted last week that upcoming interest rate increases may be less severe than the past rate hikes of 75 basis points, he also noted that the Fed could raise the federal funds rate “somewhat higher” than initially planned.
Investors are now focusing their attention on those comments this week as the Fed prepares for its next meeting beginning on Dec. 13.
Central bank officials are largely expected to raise interest rates by an additional 50 basis points at the meeting, and with inflation still high and the job market resilient, some investors are concerned that the Fed will continue raising rates until it tips the economy into a recession.
Lucid investors are particularly concerned about that prospect as the EV maker is a young start-up that’s still trying to find its footing in the rapidly expanding EV industry.
Higher interest rates mean higher borrowing costs for companies looking to grow their business, and they also translate into higher costs for potential vehicle purchases.
Lucid isn’t alone in its decline today. Tesla‘s shares were sliding after news reports surfaced that the company could be scaling back the output of its Model Y in China by up to 20% this month.
Any economic slowdown in the U.S. would put additional pressure on Lucid and on other EV makers who have already dealt with rising material costs and supply chain hiccups over the past couple of years.
Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool’s premium services.
Making the world smarter, happier, and richer.
Market data powered by Xignite.
