What happened
Shares of the online car-buying company Carvana (CVNA 6.38%) were falling fast today, likely after investors drove the stock up higher yesterday in response to rival CarMax's better-than-expected earnings report.
But Carvana investors are reversing their optimism today, likely as they realize that the U.S. economy is still in a precarious position. The company's stock was down by 6.4% as of 12:03 p.m. ET.
So what
Carvana's stock spiked yesterday after competitor CarMax beat analysts' earnings estimate for its latest quarter. But investors appear to be rethinking their optimism, instead focusing on other news today, including a comment from a Federal Reserve official about more work to be done to bring down inflation.
Image source: Getty Images.
The Consumer Price Index rose just 0.1% in March, lower than an expected 0.2% increase, which initially gave investors a lot of optimism. However, Richmond Federal Reserve President Thomas Barkin said in a CNBC interview today that despite potentially reaching peak inflation, "we still have a ways to go."
Adding to the economic worries today was the fact that the International Monetary Fund said that a hard landing for the U.S. economy is "within the realm of possibilities" for the U.S. economy.
Carvana's investors are likely especially sensitive to this news because the company's business is suffering right now and there have been concerns about the viability of its business model.
Now what
Investors are likely concerned that if the Federal Reserve needs to continue to raise interest rates, it could further reduce vehicle demand from potential Carvana customers. Additionally, if the rate hikes end up spurring a recession, it could slow down demand for vehicles even further.
Carvana is already losing lots of money right now and trying to cut costs, but a slowing economy could hamper the company's plans and compound the company's financial difficulties.
