What happened
Shares of the online car-buying company Carvana (CVNA -0.29%) were falling once again today, after plunging 20% just last week. There wasn't any company-specific news driving the stock down today. Instead, investors were likely following the broader market slide today as the Nasdaq Composite fell 0.6% and the S&P 500 tumbled 0.9%.
Fears of a potential recession among investors likely helped drive Carvana's share price down 6.7% today.
So what
Carvana investors have been particularly on edge lately as they process macroeconomic news. Any slowdown in the U.S. economy would be bad for used-car sales, and right now, investors don't like what they see.
Image source: Getty Images.
Just last week, the Federal Reserve hiked the federal funds rate by an additional 75 basis points to try taming sky-high inflation. The Fed not only continued its aggressive stance to fight inflation but also said it would continue raising rates in 2023.
That spooked investors last week, and it's still worrying Carvana investors today. Shareholders are concerned that the Fed's current path could end up spurring a recession in the U.S.
Additionally, the Fed rate hikes are having their intended consequence of pushing up other borrowing costs -- including for car loans -- which could end up causing some consumers to delay their car purchases.
Now what
Carvana investors will likely have to put up with some more volatility in the short term. Investors are still trying to figure out which way the economy is headed and how long it'll take for inflation to come back down.
This doesn't mean that Carvana won't be a good long-term investment. It does mean, however, that it's going to take more time before some investors are willing to bet on high-growth companies again.
