What happened 

The market has shrugged off any worries about inflation or an economic slowdown today. The S&P 500 is up 2.6% as of this writing and the Nasdaq Composite is up 2.9%. Not surprisingly, highly volatile renewable energy stocks have been rising with them. 

Sunrun (RUN -6.89%) jumped as much as 10% in trading today, Bloom Energy (BE -0.23%) was up 6.4%, and Lordstown Motors (RIDE 4.48%) gained 7.1%. At 2:50 p.m. ET, shares were up 6.7%, 4.4%, and 4.1% respectively. 

So what 

There are a number of factors impacting the energy industry specifically today. One is the increase in oil prices, which has seen West Texas Intermediate crude jump 3.5% to $86.47, Brent crude increase 3.3% to $91.82, and natural gas spike 5.8% to $6.85 per million British thermal units (a unit of measurement for natural gas) in the U.S. In Europe, natural prices fell as much as 10%, which could ease some of the economic impact of energy disruptions caused by Russia's invasion of Ukraine. 

The Institute for Supply Management said on Monday that its manufacturing purchasing managers index was just 50.9, the lowest level since May 2020 and down from 52.8 in August. A reading above 50 indicates that manufacturing is expanding, but growth appears to be slowing and that's cause for concern for the economy. 

Job openings also fell in August by 1.1 million jobs to 10.05 million, indicating that companies are pulling back on their hiring as interest rates rise and the economy slows.

You would think that high oil prices, poor manufacturing indicators, and fewer jobs are bad for the economy -- and that would be right -- but the market is thinking about interest rates. The Federal Reserve has been aggressively raising rates to combat inflation and investors have expected rate increases to continue into 2023. But a slowing economy may cause central banks around the world to reconsider higher rates, which is why investors are buying riskier assets like stocks today. 

Now what 

Renewable energy stocks are up big today for two main reasons. One is oil is a competitor for wind, solar, and electric vehicles, so it's natural for renewable energy stocks to rise when oil is up. 

The bigger impact, though, would be interest rates. Lower interest rates help renewable energy projects because they make the long-term cash flows more valuable in today's dollars (which I cover here). High rates are a headwind, so any end in sight to higher rates would be good news. 

What's important to keep in mind today is that nothing has fundamentally changed about the renewable energy market. Long-term, there are still tailwinds from falling costs and subsidies that boost demand. But companies face a challenging competitive environment. It's that competitive picture that could limit returns for renewable energy stocks. But for today they're up because economic news was bad, which may not seem logical until you realize short-term stock prices are driven by interest rate speculation right now.