What happened
Shares of the Chinese electric vehicle maker Nio (NIO 3.20%) made gains in early trading this morning, likely as investors processed the news that another EV maker -- Lucid Group -- said that it would meet its vehicle production goal for the year.
The EV stock was up by as much as 4.9% this morning. Unfortunately, the move didn't last after investors processed the latest inflation data, which showed that wholesale prices continue to rise. Investors are worried that rising inflation means the Federal Reserve will continue hiking interest rates.
As a result, Nio's shares were down by 1.9% as of 10:59 a.m. ET.
Image source: Nio.
So what
Nio investors were likely initially optimistic this morning after electric vehicle maker Lucid said that it is on track to produce between 6,000 to 7,000 vehicles this year. Lucid said today that it produced 2,282 vehicles in the third quarter (ended on Sept. 30), which will help it achieve its full-year production goal.
Lucid previously had to revise its annual production estimate down, so the company saying that it will indeed meet its latest goal is good news for the company.
And that good news likely spilled over to Nio's stock earlier this morning because EV stocks often react to what's happening in the broader industry. If Lucid can meet its production goals, Nio shareholders will be more optimistic that the EV industry is doing well and that Nio will be able to reach its goals as well.
But that optimism quickly faded when investors saw that the producer price index increased 0.4% for September -- much faster than some analysts' estimate of 0.2%. That means that wholesale prices -- excluding food, energy, and trade services -- continued to accelerate despite the Federal Reserve's efforts to tame inflation by increasing interest rates.
The increase has investors worried that the Fed will view this data as yet more proof that it needs to continue with aggressive rate hikes to bring inflation down.
Now what
Nio's initial share price jump and then decline this morning shows just how volatile the market is right now.
And while it's not fun to ride out these share price swings, long-term investors should remember that these moves don't have anything to do with the company's underlying business. Nio could still end up being a good long-term investment, but investors will likely have to stomach more volatility in the short term.
