Why Rocket Lab Stock Plummeted This Week
Key Points
Rocket Lab stock sank this week as investors reacted to last week's Blue Origin explosion, SpaceX IPO news, and macroeconomic pressures.
Space stocks fell after SpaceX set a $1.77 trillion IPO valuation -- down from previous expectations for a valuation of as much $2 trillion.
A strong jobs report has investors worried that the Federal Reserve will raise interest rates.
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Rocket Lab (NASDAQ: RKLB) stock suffered a substantial pullback over the last week of trading. The company's share price sank 25.1% across a stretch that saw the S&P 500 decline 2.6% and the Nasdaq Composite fall 4.7%.
Rocket Lab's valuation was under pressure this week as investors reacted to Blue Origin's rocket explosion the previous Friday and repositioned ahead of SpaceX's upcoming IPO. The company's stock also saw a substantial pullback in response to the Bureau of Labor Statistics' May jobs report. Despite this week's big sell-off, Rocket Lab's share price is still up roughly 58% year to date.
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Rocket Lab sank as investors repositioned on space stocks
Space tech stocks got hit with big sell-offs this week. Investors continued to reduce exposure to the face following the launchpad explosion of Blue Origin's New Glenn rocket at Cape Canaveral, Florida on May 28. In addition to that pressure, investors reacted negatively to some news about SpaceX's IPO.
SpaceX is set to go public on June 12, and its upcoming public debut has been a huge catalyst for other space tech stocks. While excitement surrounding SpaceX's IPO has helped juice valuations across the space industry, news that Elon Musk's company had lowered its planned IPO range from roughly $2 trillion to $1.77 trillion dampened excitement for space tech stocks this week.
Investors are worried about a rate hike
The Bureau of Labor Statistics published its jobs report for May on Friday, and unexpectedly estimated that 172,000 nonfarm payroll jobs had been added last month. Economists had forecasted that only 80,000 jobs would be added.
With the stronger-than-expected jobs report, investors are worried that the Federal Reserve will raise interest rates this year. Inflation has accelerated recently, and relatively strong jobs growth makes it more likely that the central banking authority will prioritize reducing inflation over stimulating economic activity. If the Fed raises rates, it would create a less favorable valuation backdrop for Rocket Lab and other growth stocks.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool has a disclosure policy.
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