Clean-energy stocks soared on Tuesday after the latest government statistics showed that inflation is cooling. Lower inflation could lead the Federal Reserve to stop raising interest rates, and make it cheaper to borrow money for new solar, wind, and electric-vehicle projects.
The 10-year Treasury yield dropped 0.19 percentage point to 4.44% on Tuesday, its largest decline since March. It is a clear sign that traders are betting on lower interest rates.
Clean-energy investors cheered the news. The
Invesco WilderHill Clean Energy ETF
(PBW) was up 8.2%, its best performance in a year.
Solar-equipment makers
Enphase Energy
(ENPH) and
SolarEdge
(SEDG) rose 16% and 11% respectively. Solar developer
Sunrun
(RUN) was up 19%, while the wind developer Orsted (DNNGY) was up 9%. Renewable-focused utilities AES (AES) and NextEra Energy (NEE) rose 9% and 6% respectively.
It has been a miserable year for all of those companies, and Tuesday’s gains still leave them down badly for the year. The clean-energy ETF is down 30% in 2023.
But the rally does show just how much interest rates have been weighing on the names. It is giving investors hope that lower rates will bring the stocks back from their slumps.
Clean-energy projects demand large upfront investments that become much more costly when interest rates rise. High rates are one reason wind installers have struggled to build large turbine projects in recent months. They have also dissuaded homeowners from putting solar panels on their roofs, because financing those panels is much more expensive when rates are high.
Even with Tuesday’s move, investors will need to see more progress on rates and other issues like supply-chain problems before the stocks come back in a more consistent way.
Write to Avi Salzman at [email protected]
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