Solar stocks extend gains on Fed rate cut hopes after cooler inflation data

Solar stocks are moving higher Wednesday, continuing their recent rally, after slowing May inflation data sent U.S. Treasury yields tumbling before the Federal Reserve’s June interest rate decision.

High interest rates make it difficult for consumers to justify adding solar installations to their roofs, making solar less competitive than regular electricity.

Among leading solar names, all still up but below earlier highs: Sunrun (RUN) +2.9%, Canadian Solar (CSIQ) +2.3%, Enphase Energy (NASDAQ:ENPH) +2.3%, Solaredge Technologies (SEDG) +1.3%, First Solar (FSLR) +1.2%.

Alternative energy stocks also show strength: TPI Composites (TPIC) +8.5%, Enovix (ENVX) +8.3%, Stem (STEM) +7.4%, Bloom Energy (BE) +6.9%, FuelCell Energy (FCEL) +3.2%, Ballard Power Systems (BLDP) +2.6%, Plug Power (PLUG) +2.5%, Clean Energy Fuels (CLNE) +2.4%.

ETF: (TAN)

The consumer price index came in flat for May, lower than the Dow Jones estimate for a 0.1% monthly increase, and rose 3.3% Y/Y, which also was slightly below expectations and representing a slowing from the prior 3.4% rate.

The yield on the two-year Treasury recently sank 12.8 bps to 4.704% from 4.832% on Tuesday, the 10-year Treasury yield fell 11.5 bps to 4.288% from 4.403%, and the 30-year yield slipped 7.6 bps to 4.458% from 4.534%.

Fed fund futures indicated traders were placing the odds of an interest rate cut in September at ~70% following the data, up from even odds a day ago, although traders are not expecting any change at today’s Fed policy meeting or in July.