Why Archer Aviation Stock Plummeted Today
Key Points
Archer Aviation stock got hit with a double-digit pullback despite no business-specific news.
Investors had a staunchly negative reaction to May's stronger-than-expected jobs growth.
The market is worried that the Federal Reserve will raise interest rates this year.
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Archer Aviation (NYSE: ACHR) stock got hit with a wave of turbulence in Friday's trading. The electric vertical take-off and landing (eVTOL) aircraft company's share price closed out the daily session down 13.2%. The stock had been down as much as 15.7% in the day's trading.
Growth stocks got hit hard in today's daily trading session, with the S&P 500's level moving 2.6% lower and the Nasdaq Composite's level closing out the day down 4.2%. The Nasdaq Composite recorded its biggest daily drawdown since April 2025, and Archer Aviation stock moved lower amid the risk-off trade.
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Macroeconomic concerns have come back into focus
Despite geopolitical volatility and recent acceleration of inflation, the stock market has posted strong gains this year. Even with today's big sell-offs, the S&P 500 and the Nasdaq Composite are still up 7.9% and 10.6% this year, respectively. Today's trading suggests that investors are worried that this year's gains look fragile.
The Bureau of Labor Statistics published its May jobs report this morning, and net nonfarm payroll additions of 172,000 far exceeded the 80,000 addition target called for by economists. With job growth coming in relatively strong, the Federal Reserve could shift its focus to curbing inflation and using higher interest rates to accomplish the task.
What would higher interest rates mean for Archer?
Despite recent sell-offs, Archer still has a market capitalization of roughly $4.2 billion and is valued at approximately 444 times this year's expected sales. With that kind of highly growth-dependent valuation profile, Archer could face outsized valuation pressures if the market's read on the broader macroeconomic picture turns bearish.
Growth stocks like Archer tend to perform much better in low-interest rate environments, and a move by the Fed to raise rates this year could crush the market's appetite for risky, speculative plays. While investors shouldn't overreact to today's market moves, they highlight the risks that higher rates pose for Archer and other growth stocks.
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Keith Noonan 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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