What happened
Shares of electric vehicle (EV) stocks were rising today as investors processed the latest inflation data, which was better than expected.
Investors are hoping slowing inflation could spur the Federal Reserve to slow the pace and intensity of its interest rate hikes. As a result, market indexes were inching higher today with the S&P 500 up by 0.25% and the tech-heavy Nasdaq Composite gaining 0.8% by midafternoon.
EV investors were enthusiastic as well, with Nio's (NIO 2.30%) share price climbing 2.8%, EV charging company ChargePoint Holdings (CHPT -1.43%) rising 3.6%, and EV battery company QuantumScape (QS -1.98%) jumping 6.1% as of 1:50 p.m. ET.
So what
Today, the Bureau of Labor Statistics released the Producer Price Index (PPI) index data for October, which is a measure of wholesale inflation, showing that the index rose 0.2% for the month, lower than the 0.4% increase that economists were estimating.
Image source: Getty Images.
The PPI data comes on the heels of better-than-expected consumer price data reported last week, both of which are causing investors to be encouraged that inflation's rapid rise is finally slowing.
EV investors may be particularly interested in slowing inflation because rising prices for vehicles and materials have weighed down on the industry lately.
QuantumScape and ChargePoint are both U.S.-based companies, so any indication that inflation could be easing is welcomed news. If inflation slows down enough the Federal Reserve could pull back on the rate and intensity of its interest rate hikes.
Investors have been very worried that rising rates could spur a potential recession.
Federal Reserve Vice Chair Lael Brainard gave investors some hope yesterday when she said in an interview with Bloomberg News, "I think it will probably be appropriate soon to move to a slower pace of rate increases."
The next Fed meeting is scheduled for mid-December. Some investors are anticipating a 50-basis-point hike at the meeting, down from the Fed's 75-basis-point hikes at its last four meetings.
Additionally, shares of China-based Nio may be getting an extra boost today after U.S. President Joe Biden met with Chinese President Xi Jinping yesterday, their first in-person meeting since Biden became president.
China and the U.S. have experienced rising tensions lately so any indication that the two countries are more open to diplomatic talks may be encouraging Nio investors. Nio said recently that it wants to enter the U.S. automotive market in late 2025.
Now what
While inflation data may appear to be moving in the right direction, investors should also be cautious about getting too optimistic too quickly.
It's likely that the Federal Reserve will continue its path of interest rate hikes for a while. Inflation is still at a near 40-year high and the latest data likely isn't yet good enough to cause the Fed to completely reverse course, though the intensity of hikes could slow.
In the meantime, there could be more short-term volatility from Nio, QuantumScape, and ChargePoint as investors try to determine where inflation is going and how the Fed will respond to it.
