What happened 

Shares of fuel cell stocks had a rough start on Tuesday before recovering a big chunk of their losses for the day. Bloom Energy (NYSE:BE) dropped 13.5% early, only to close the day down 1.1%, while Ballard Power Systems (NASDAQ:BLDP) fell 15.7% before closing down 1.8%, and FuelCell Energy (NASDAQ:FCEL) lost 22.3% of its value before closing 3.9% lower. It was a wild day, but there wasn't a lot that really happened. 

Bubble with H2 stuck inside.

Image source: Getty Images.

So what

The first impact on energy stocks this morning was a drop in oil prices. You can see in the chart below that oil prices dropped just before 10 a.m. EDT, and fuel cell stocks exaggerated that move by a wide margin. As oil recovered, so did the stocks. 

BE Chart

BE data by YCharts.

It didn't help that growth stocks also had a bad day, with investors selling off stocks that have typically performed well over the past year. Bloom Energy, Ballard Power, and FuelCell Energy certainly fall into that category. 

And the general market concern over rising interest rates has impacted fuel cell stocks more than others on the market. Large fuel cell installations, particularly commercial and industrial-scale projects built by Bloom Energy and FuelCell Energy, are often financed partly with debt. So as rates rise, the cost of electricity from these projects effectively goes up. 

10 Year Treasury Rate Chart

10-year Treasury rate data by YCharts.

Add all these factors together and you have a recipe for a down day for fuel cell stocks. But as oil prices recovered and the market overall bounced back, so did these stocks. 

Now what

There wasn't any news out today that should make investors change their long-term investment thesis for fuel cell or hydrogen stocks. There's still a huge opportunity in the power grid's transition to renewable energy, and these companies have a big role to play. The uncertainties about how big the market is and how quickly the transition will take place haven't changed in the last 24 hours. 

What investors should keep an eye on are interest rates, which could be a long-term drag for both renewable energy deployment and fuel cell adoption. If rates continue to rise or inflation strikes in the U.S., investment in fuel cells on a large scale could slow dramatically. The Federal Reserve has said rates won't rise for the foreseeable future, so I don't think the risk is high, but understanding why higher rates are bad for fuel cell stocks is important on days like today. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.