Lucid Group, Inc. (NASDAQ: LCID) witnessed a significant rebound in its shares following a brief period of weakness. On Friday, the stock jumped 5.23%, indicating renewed investor confidence. This recovery can be attributed to the release of better-than-expected U.S. jobs data on Thursday, which has raised concerns about potential future rate hikes. In addition, Dallas Fed president Logan has also suggested that further rate hikes may be necessary.
June FOMC Minutes
The recently published June FOMC Minutes shed light on the Federal Reserve’s stance on the job market. While conditions remain tight, there are indications that the supply and demand dynamics in the labor market are moving towards a more favorable balance.
Notably, U.S. private businesses added 497,000 payrolls last month. This figure marks a notable increase from May’s 267,000 and surpasses the forecasted 228,000. It’s the highest level of ADP employment growth recorded since February 2022.
The increase in employment was primarily driven by small and midsized companies, which contributed 299,000 and 183,000 jobs, respectively. In contrast, large companies reported a decline of 8,000 jobs.
The services sector demonstrated positive performance, creating 373,000 jobs. The leisure/hospitality sector took the lead with 232,000 jobs, followed by trade/transportation/utilities with 90,000 jobs.
Implications on Lucid Stock
However, the rise in interest rates could have potential repercussions for electric vehicle companies like Lucid Group. This could lead to increased capital costs, impacting their ability to secure favorable terms for raising funds through debt or equity offerings. Elevated borrowing costs might hinder the company’s plans for growth, investment in research and development, manufacturing capacity, and infrastructure.
Furthermore, higher interest rates can also have repercussions on the cost of raw materials, production equipment, and other inputs within the electric vehicle supply chain. If borrowing costs go up for suppliers, it has the potential to result in higher prices for components, ultimately affecting Lucid Group’s manufacturing expenses and overall profitability.