What happened
Shares of Airbnb (ABNB) rose by as much as 4.8% Tuesday as the broader market got off to a strong morning start. Some investors may have also been paying attention to comments from Truist Securities analysts highlighting that hybrid work could add $54 billion in bookings for travel companies like Airbnb.
But by mid-afternoon, the stock had given up some of those initial gains as investors continued to worry about the state of the U.S. economy. The stock was up by 2% as of 2:48 p.m. ET.
So what
Investors began the day in a generally optimistic mood. Some of that may have been due to comments from Federal Reserve Bank of Chicago President Charles Evans, who said during an interview on CNBC that he wondered if the Fed was raising rates too quickly.
Image source: Getty Images.
"We have done three 75 basis point increases in a row and there is a talk of more to get to that 4.25% to 4.5% by the end of the year, you're not leaving much time to sort of look at each monthly release," Evans said.
That left many investors with a bit more hope that the Fed might taper its pace of interest rate hikes.
Airbnb investors were not only considering those comments but also processing the fact that Truist Securities analysts think that hybrid work and remote work could continue to boost weekend trips.
The analysts said in an investor note Tuesday that the trend could add an incremental $27 billion to lodging bookings in the short term -- compared to pre-pandemic levels -- with about $18 billion of that going to lodging companies including Expedia, Bookings Holdings, and Airbnb.
Additionally, the analysts said that over the long term, this boost to demand could unlock up to $54 billion in U.S. bookings.
Now what
While Airbnb's stock was still in positive territory for the day as of this writing, it was clear by mid-afternoon that some of the earlier upbeat sentiment was wearing off. That's likely because the broader market began to slide, pushing the S&P 500 and the Nasdaq Composite back into negative territory.
Investors remain worried that the Federal Reserve will keep up its pace of aggressive rate hikes and potentially tip the U.S. economy into a recession. Those fears have led to five consecutive down days in the market.
Airbnb shareholders can likely expect more volatility as investors try to gauge how the state of the economy will impact the company. But investors should remember that buying shares of great companies and holding them for five years or more is the best way to avoid making fear-based investing decisions.
