By Angela Palumbo

Solar stocks were climbing after the Federal Reserve lowered interest rates on Wednesday, giving investor's confidence that solar panel demand could bounce back.

Following signals that the labor market is softening and inflation is cooling, the Fed cut interest rates by a half percentage point. The decision to lower rates by so much sparked a rally in the overall market, with futures for Dow Jones Industrial Average up 1.1%, S&P 500 futures gaining 1.6% and futures for the tech heavy Nasdaq Composite jumping 2.1% on Thursday.

One standout sector was solar stocks. The Invesco Solar ETF was rising 3.1% in premarket trading Thursday. If the ETF maintained this levels, it would be its highest close since July 16, 2024, according to Dow Jones Market Data. Coming into the session, the fund has dropped 20% this year. Demand for solar panels has taken a hit amid increased interest rates and inflationary pressures. Since interest rates make it more expensive to finance expensive purchases, fewer consumers were adding solar panels to their homes.

Solar companies and investors have been waiting on the Fed to cut interest rates. Enphase Energy Chief Executive Badrinarayanan Kothandaraman said on the company's second-quarter earnings call on July 23 that "we expect the Fed to lower interest rates later in the year, so that will also be a tailwind improving solar economics for U.S. consumers."

Solar companies need the boost. As the sector continued to struggle, SunPower filed for voluntary Chapter 11 protection in August. Also in August, SolarEdge announced that its chief executive officer stepped down.

Shares of Enphase were climbing 4.2% in premarket trading Thursday. Meanwhile, First Solar gained 3.7%, Sunrun jumped 4.2% and SolarEdge Technologies increased 5.4%.

Write to Angela Palumbo at angela.palumbo@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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September 19, 2024 08:56 ET (12:56 GMT)

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