What happened
Just as quickly as electric vehicle stocks spiked yesterday, they began retreating today. Broad market indices were sliding today as investors feared strong jobs data will spur the Federal Reserve into continued aggressive interest rate hikes.
That caused EV stock investors to worry again about the state of the economy and caused Rivian Automotive (RIVN -3.44%) to fall 1.9%, the EV charging company ChargePoint (CHPT -3.10%) to drop 5.2%, and EV battery company QuantumScape (QS -8.30%) to slide 4.8% as of 2:38 p.m. ET today.
So what
Investors were eager to snatch up shares of companies yesterday following the S&P 500's 9% decline in September. Some investors thought that perhaps the market had reached its bottom and were ready to buy stocks again. But today's drop proved that sentiment wrong.
Image source: Getty Images.
Investors may have been reacting to recent ADP jobs data that showed businesses added 208,000 jobs in September. A strong labor market is good for job seekers but it's spooking the market as investors anticipate that the Federal Reserve will view jobs growth as proof that the economy can withstand further interest rate increases.
This has EV stock investors worried that a slowing economy will cause financial pain for Rivian, ChargePoint, and QuantumScape.
This shifting sentiment comes after Rivian released strong third-quarter (ending on Sept. 30) vehicle production numbers just two days ago. The company said that third-quarter vehicle production increased 67% sequentially to 7,363 vehicles.
Rivian's management also said the company is on track to meet the full-year vehicle production guidance of 25,000 that it set back in March.
That good news not only has caused Rivian's share price to jump over the past couple of days, but it's also likely helped lift ChargePoint and QuantumScape stocks as well.
EV investors often look to vehicle production numbers as a bellwether for the overall health of the industry, so Rivian's strong vehicle production encouraged ChargePoint and QuantumScape investors that the EV industry is charging ahead.
But the share price drop today for all of these companies shows just how worried investors still are about the economy. The EV market has experienced an influx of interest and demand from consumers, but rising material costs, a chip shortage, and rising labor costs have hampered some of its progress.
A significant slowdown of the U.S. and global economies would weigh heavily on Rivian, ChargePoint, and QuantumScape's ability to grow their businesses.
Now what
EV investors have been on a roller-coaster ride over the past few days and it's hard to know when they'll be able to get off. The Bureau of Labor Statistics will release its latest jobs report later this week and investors will likely respond to what it says.
The temptation for investors right now is to take daily news about the economy and then try to guess how the Federal Reserve is going to react in response to it. That is, of course, not a great long-term investing strategy.
Instead, investors should take a close look at the financials for Rivian, ChargePoint, and QuantumScape, along with the long-term potential in their respective markets and any advantages they have over their competitors, and then determine what to do with each company's stock.
