Why USA Rare Earth Stock Plummeted 15.7% Last Month But Has Climbed in March

USA Rare Earth (NASDAQ: USAR) stock lost ground in February's trading. The deep-sea mining company's share price fell 15.7% in the month, according to data from S&P Global Market Intelligence. Across the same period, the S&P 500 and the Nasdaq Composite declined 0.9% and 3.4%, respectively.

USA Rare Earth's valuation slid last month despite the announcement of moves from the U.S. government to bolster domestic mineral access. Despite bearish pressures last month, the stock is still up roughly 75% over the last year.

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USA Rare Earth stock sank last month in response to varied catalysts

On Feb. 3, President Donald Trump's administration announced a new project to improve the U.S.'s critical mineral reserves. The announcement of the initiative outlined more than 50 minerals, including rare earths, that are viewed as crucial for defense and other vital industries. The "Project Vault" program is receiving a $10 billion loan from the U.S. Export-Import Bank and an additional $2 billion from private sources and will use the funds to build a stockpile of vital minerals.

The news followed an announcement made in the previous week that the U.S. Commerce Department and a series of partners would be investing directly in USA Rare Earth. While the Project Vault news initially prompted gains for USA Rare Earth, the stock saw sell-offs in the next day of trading after Vice President JD Vance announced that the U.S. planned to form a trading coalition with 50 other countries to reduce reliance on China for mineral supplies.

While Vance's announcement didn't necessarily have negative business-specific implications for USA Rare Earth, investors seem to have interpreted the coalition news as a sign that the U.S. might not be relying on the company as much as previously anticipated. Investors may have also viewed news that the coalition would seek to establish pricing floors for certain key minerals as something of a double-edged sword given uncertainties surrounding the levels at which price floors would be set and the risk of creating market inefficiencies.

In addition to these dynamics, USA Rare Earth stock saw pullbacks in conjunction with investors taking profits and rotating out of speculative growth plays and macroeconomic developments. The U.S. Supreme Court ruled that many of the tariffs imposed by President Trump were not constitutionally supported, and higher-than-expected producer-price-index (PPI) data at the end of the month also spurred a pullback for equity prices.

Why USA Rare Earth stock has been rising in March

Over the past weekend, the U.S. and Israel launched joint strikes on Iran. In turn, Iran launched strikes on U.S. and Israeli bases in the region and also attacked targets in neighboring Middle Eastern countries and Cyprus. While these developments have spurred volatility across the broader market, they have helped bolster support for some infrastructure, mining, and defense industry stocks. USA Rare Earth stock is up 2% in March as of this writing.

China processes the majority of global rare-earth mineral and is viewed as an ally of Iran's. With geopolitical instability on the rise, some investors are betting that domestic mineral sourcing capabilities will become increasingly important.

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.