Why Carvana Shares Are Rising Today


What happened

Shares of carvana (NYSE: CVNA) were soaring this morning as investors revived some of their optimism for equities, in general, today. Comments from a Federal Reserve official on the possibility of raising the federal funds rate too quickly to fight inflation could be the reason Carvana investors are back in action. Carvana’s stock price was up 5.7% at 11:32 a.m. ET.

So what

Yesterday, Carvana stock plunged as well as the broader market, as investors continue to fear that aggressive rate hikes by the Federal Reserve could end up slowing the economy too much and possibly pushing it into a major recession.

Image source: Getty Images.

The Fed raised the fed funds rate by 75 basis points last week and since then the market has wobbled – falling for five straight trading days and pushing the S&P500 to a two-year low yesterday.

But investors reversed their pessimism today. The reason? Chicago Federal Reserve Chairman Charles Evans told CNBC that he wondered if the Fed was raising rates too quickly, without waiting long enough to assess their impact.

“We’ve done three 75 basis point increases in a row and there’s more talk to get to that 4.25% to 4.5% by the end of the year, you don’t leave a lot of time for watch monthly release,” Evans said.

Carvana investors are processing Evans’ comments today and hoping it means the Fed could ease the speed and intensity of interest rate hikes.

Now what

While Carvana shareholders are no doubt thrilled to see the company’s share price jump today, they should also temper their expectations. Evans’ comments do not guarantee that the Fed is done with its aggressive rate hikes. Additionally, the Fed’s existing measures to curb inflation could further slow the economy significantly, which could end up hurting Carvana sales.

All of this means that investors should consider Carvana’s underlying business and its potential in the used car sales market when making the decision to buy or sell the stock, rather than trading. on the daily news.

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Chris Neiger has no position in the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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