What happened
Shares of online car buying company Carvana (CVNA -0.36%) were tumbling this morning after the company's price target was cut by an analyst yesterday. The stock is likely also falling as the broader market reverses its gains from yesterday as investors process the latest jobs data
Investors are worried that the latest jobs data, which indicated the U.S. labor market is still strong, will encourage the Federal Reserve to continue aggressively raising interest rates to fight inflation. As a result, Carvana's stock was down by 9.2% as of 10:36 a.m. ET.
So what
Investors pushed up most stocks yesterday after the S&P 500 fell more than 9% in September. Some investors may have thought the market was near its bottom and were ready to jump back into stocks.
Image source: Getty Images.
Carvana's stock rose by 8% yesterday as a result, but it's sliding today as investors process jobs data from Automatic Data Processing that show businesses added 208,000 jobs in September, more than what some analysts were estimating.
While that's a good news for people looking for jobs, it also has investors worried that the Federal Reserve will view a strong labor market as proof that the economy can continue to withstand aggressive interest rate hikes.
Carvana investors are concerned that ongoing interest rate hikes will slow down the economy too much and cause some potential car-buying customers to delay purchases.
Making matters worse for Carvana shareholders today is the fact that Truist analyst Naved Khan lowered Carvana's price target from $80 to $50 yesterday. While Khan kept a buy rating on the stock, he said there could be weakening retail demand and softer prices for used vehicles in the short term, according to The Fly.
Now what
Carvana's share price spike yesterday followed by its fall today is the perfect example of just how volatile the market is right now. Investors are trying to use the daily news to predict the Federal Reserve's next moves and it's causing a lot of stock price instability.
The Bureau of Labor Statistics will release more concrete jobs data later this week, which could add more volatility to Carvana's share price in the near term.
