Shares of Ford (F 2.50%) stumbled today as investors processed comments made by Philadelphia Federal Reserve President Patrick Harker that the Fed is nowhere near done hiking interest rates.
Ford investors are worried that continued aggressive increases in interest rates will slow the economy too much and end up hurting vehicle sales. As a result, the auto stock was down by 2.5% by the end of trading on Thursday.
Ford's share price wasn't moving all that much earlier in the day, but it began tumbling once Harker's comments were published. The Fed official said in a speech today, "We are going to keep raising rates for a while" because of the "disappointing lack of progress on curtailing inflation ..."
Harker added that the Fed won't stop increasing the federal funds rate until sometime next year and that "It will take a while for the higher cost of capital to work its way through the economy."
That's the exact opposite of what investors wanted to hear today, and market indexes slid on Harker's comments. The S&P 500 was down by 0.8% and the tech-heavy Nasdaq Composite fell by 0.6% for the day.
Ford investors were spooked by the comments as well because higher interest rates result in higher borrowing costs for customers, which could cause some of them to delay purchases.
And investors are getting very concerned that prolonged aggressive hikes in interest rates could tip the U.S. economy into a significant recession.
While investors were a bit worried today, they'll get more insight into how Ford is doing when it reports its third-quarter results on Oct. 26.
Ford's earnings are expected to fall by 27.5% to $0.37 per share in the quarter, according to Wall Street's consensus estimate, but revenue is expected to climb by about 13.5% from the year-ago quarter to $37.7 billion.
Estimates aside, investors will want to pay close attention to any comments management makes about the current state of the automotive industry.
It's likely Ford's stock could remain volatile as investors continue to process news about inflation and the economy, but they should remember that short-term swings in share price don't mean that the auto stock won't end up being a good long-term investment.