What happened

Shares of hydrogen and fuel cell specialists Plug Power (PLUG -0.82%) and Bloom Energy (BE 2.35%) fell Wednesday morning, dropping 6% and 4.6%, respectively, at their lowest points during the day. By the end of the day, though, the stocks dramatically reversed course and were each trading nearly 3% up as of 3:30 p.m. ET. There are three reasons why these stocks have been in a free fall in recent days, and there's one big reason why they finally popped end of trading today.

So what

With fears of yet another round of shutdowns gripping the market in the wake of the omicron variant of COVID-19, growth stocks have been the hardest hit in recent weeks. Plug Power and Bloom Energy are still in the early growth stage and spending all of their money on expanding their footprint. So any event that could potentially slow down or stall their expansion plans bodes ill for these companies.

A person analyzing rising stock price charts on a smartphone with a stock price display board in the background.

Image source: Getty Images.

Growth stocks, in fact, have suffered a double blow -- aside from the omicron threat, they've also felt inflationary pressures. Growing companies typically rely on debt to fund growth and therefore thrive in a low interest rate environment. Bloom Energy's long-term debt, for example, zoomed to $285.2 million as of the end of September from $168 million as of the end of December 2020. Comparatively, Bloom Energy's cash and cash equivalents balance more than halved to roughly $122 million during the said period. Plug Power is in much better stead, with roughly $124 million in long-term debt as of Sept. 30.

As it turns out, interest rates are on the verge of rising.

This afternoon, Federal Reserve economic projections hinted at three potential interest rate increases in 2022, which is above the market's expectations.

Meanwhile, a third concern has cropped up for investors who bid renewable energy stocks higher in recent weeks: doubts that President Biden's $1.75 trillion Build Back Better Act, which proposes substantial investments into clean energy including hydrogen and fuel cells, will pass this year as hoped. The bill, which is still being debated, just stalled in the Senate.

Now what

Given the concerns, why did Plug Power and Bloom Energy shares pop by the end of trading today? Ironically, it's the same Federal Reserve policy. With growth stocks falling sharply in recent weeks, much of the inflationary and interest rate fears were already baked into stock prices. The Fed didn't spring any nasty shocks and, instead, proved it's serious about bringing down inflation. With the Fed also expressing its confidence in the strength of the U.S. economy and suggesting the omicron variant may not be a really big reason to worry just yet, investors saw an opportunity to buy some cheap growth stocks before the stock markets closed for the day.