Why Carvana Shares Are Trading Higher Today

Carvana Co. (CVNA) shares are trading higher Wednesday. This surge comes amid heightened overall market strength following a larger-than-expected rate cut by the Federal Reserve.

What To Know: The Federal Reserve made headlines by slashing interest rates by 50 basis points (bps) during its September Federal Open Market Committee meeting. This decision brought the federal funds rate down to a range of 4.75% to 5%, marking the first rate reduction in over four years and breaking a streak of 12 consecutive months of steady rates.

The rate cut surprised Wall Street analysts, who had widely anticipated a more modest 25-basis-point cut. The larger-than-expected reduction resonated with investor sentiment, which had been leaning toward a more aggressive easing approach as the rate-cut cycle began. “The Committee has gained greater confidence that inflation is moving sustainably toward 2 percent,” the FOMC statement explained.

Additionally, the Fed released its updated Summary of Economic Projections, adjusting several key metrics:

• Economic Growth: The forecast for GDP growth in the current year was slightly lowered to 2% from the 2.1% projected in June.
• Inflation: Projections for inflation saw downward revisions for both 2024 and 2025.
• Unemployment: Projections for the unemployment rate were revised upward across 2024, 2025, and 2026.

One of the more significant revelations was the updated quarterly Dot Plot, a tool used by the FOMC to signal future policy intentions. The Dot Plot now indicates a more aggressive path for rate cuts than previously projected, suggesting 100 basis points of cuts in 2024. This implies the federal funds rate could fall to a midpoint of 4.4% by the end of this year, with potential 25-basis-point cuts in both November and December meetings. Further reductions are projected for 2025 and beyond, with the federal funds rate expected to drop to between 3.25% and 3.5% by the end of 2025 and to 2.9% by the end of 2026.

CVNA Price Action: Carvana (CVNA) shares were up by 3.84% at $162.59 according to Benzinga Pro.

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