What happened
Shares of Rivian Automotive (NASDAQ: RIVN) jumped 7.6% on Tuesday, halting the recent plunge in its stock price.
So what
Rivian's shares, like that of many premium-priced growth stocks, had been hit hard in recent weeks as investors responded to the prospect of higher inflation and corresponding rate hikes by the Federal Reserve. Investors tend to value future earnings less when interest rates rise. Growth stocks, in turn, often see their stock prices fall when investors fear that the Fed will need to act more aggressively to tame inflation.
Rivian's third-quarter production shortfall also contributed to the recent swoon in its stock price. Supply chain disruptions led Rivian to warn investors that it would be "a few hundred vehicles short" of its production goal of 1,200 electric vehicles in 2021.
Rivian's R1T pickup truck. Image source: Rivian Automotive.
At its lows on Monday, Rivian's shares had shed nearly 50% of their value from the highs they reached in November following Rivian's blockbuster initial public offering (IPO). Some investors apparently found that discount attractive and bought the electric vehicle maker's shares today.
Now what
Comments by Senate Majority Leader Chuck Schumer may also have contributed to the rally in Rivian's shares. Schumer said the Biden administration would once again try to get the Build Back Better Act passed early next year. The legislation includes sizable incentives for electric vehicles and billions of dollars in funding for charging stations, which are widely expected to accelerate the adoption of EVs in the U.S., should the bill pass in the Senate.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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