Why Lucid Stock Dropped 5.8% Wednesday

Electric car start-up Lucid Group (NASDAQ: LCID) stock stumbled in late-afternoon trading on Wednesday, closing the session down by 5.8%.

Wednesday's sell-off appeared to be a response to two pieces of news. First, the Federal Reserve confirmed in a statement released this afternoon that, "with inflation well above 2% and a strong labor market," it is, in fact, likely to raise benchmark interest rates -- probably as soon as March. What's more, Fed Chairman Jerome Powell strongly hinted that we're talking about not just one, but multiple 25-basis-point hikes this year, commenting at a news conference after the Fed meeting that "there's quite a bit of room to raise interest rates without threatening the labor market."

Rising interest rates will cut into the value of any future profits that Lucid might (or might not) earn. Higher interest rates also tend to make bonds seem more attractive to investors -- a second strike against this speculatively priced electric car stock.

Source Fool.com