What happened
A handful of electric vehicle (EV) stocks hit the brakes Monday morning as the optimism that pervaded the market last week began to wane.
Additionally, several pieces of negative news specific to the EV sector -- including a price target cut for Tesla (TSLA 12.55%) and a Barron's column that expressed skepticism about the futures of some EV companies -- contributed to the pessimistic mood shift.
As of 11:22 a.m. ET, Tesla was trading down by 3.5%, Rivian Automotive (RIVN 0.22%) was off by 4.7%, and EV charging company ChargePoint Holdings (CHPT 1.44%) had lost 3.8%.
So what
Let's start with the issue that is likely the main concern putting pressure on EV stocks now: persistent inflation.
Last week, the stock market rallied after the latest inflation report was better than economists had been expecting. In October, the Consumer Price Index increased 0.4% month over month and was up 7.7% year over year, less than the expected sequential increase of 0.6% and 7.9% annually.
That helped the market rally for its best week in nearly five months.
Investors were optimistic that potentially slowing inflation would encourage the Federal Reserve to ease back on its aggressive interest rate hikes.
But storm clouds returned over the weekend after Federal Reserve Governor Christopher Waller indicated that investors were reading too much into the October inflation report.
While Waller said the Fed may be at the point where it can consider shrinking the increments of its federal funds rate hikes, he also said that "we're not softening" and added: "Quit paying attention to the pace and start paying attention to where the endpoint is going to be. Until we get inflation down, that endpoint is still a ways out there."
Those comments rained on investors' parade and helped send EV stocks sliding Monday morning.
Adding to some of the EV pessimism was a column published by Barron's over the weekend that asserted that rising inflation and falling share prices could hurt many EV start-ups as they try to raise capital.
Those concerns could especially be weighing on ChargePoint Holding and Rivian Monday as investors try to gauge how well EV companies will be able to navigate continued supply chain issues and rising costs.
Finally, investors may also be reacting to Bank of America cutting its share price target for Tesla from $325 to $275. Analyst John Murphy wrote in a research note distributed Monday that supply chain issues will continue to be a problem for the company and the broader electric vehicle industry.
Now what
EV stocks have tumbled significantly over the past year -- Tesla fell 44%, Rivian tumbled 74%, and ChargePoint plunged by 51%.
But Rivian showed in the third quarter that it can continue to increase its vehicle production -- output was up by 67% -- despite the headwinds. And the company still has $13.8 billion cash and cash equivalents on its books, enough to fund its operations through 2025.
And Tesla's latest results were solid. It increased sales by 56% and earnings by 69% compared to the year-ago quarter, and vehicle production jumped 54% in Q3 to 365,923 vehicles.
ChargePoint investors will get a closer look at the company's financial picture on Dec. 1, when the company reports its results for its fiscal third quarter, which ended Oct. 31.
But with inflation still high and investors concerned about the potential of a U.S. recession, it's likely that EV stocks could remain volatile in the short term.
