Friday’s jobs report crushed expectations, showing the resiliency of the U.S. economy, despite higher interest rates.
So, if the economy looks OK, why are stocks trading lower?
Debt-heavy companies like Coinbase Inc COIN, Carvana Co CVNA and Upstart UPST moved lower following Friday’s jobs report as investors worry the strong labor market means that the Federal Reserve will be able to keep interest rates higher for longer.
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Higher interest rates typically impact growth companies that borrow money more than more established companies.
In pre-market trading Friday morning, Carvana’s stock traded down more than 8%. Upstart and Coinbase’s stocks traded lower by about 7%. But, it’s still been a great week for these names and other growth companies.
In fact, throughout the last five trading days alone, Carvana’s stock is up more than 120%. In the last month, Coinbase’s stock is up more than 140%. So, it’s not incredibly surprising to see some of these names give up some gains after such drastic moves to the upside in a short period of time.
In Powell’s press conference Wednesday, he said that he doesn’t expect any rate cuts in 2023. This is bad news for growth companies that are borrowing money currently, but a stronger-than-expected economy could still trigger a bull market.
Crypto companies and housing lenders also took a hit Friday morning on expectations of higher interest rates for longer. Opendoor Technologies OPEN opened down about 8%, as did its peer Redfin Corp RDFN.
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Crypto mining companies Mara Digital Holdings MARA and Riot Platforms RIOT moved lower following the jobs report, as higher rates typically correlate with lower demand for speculative assets like crypto.
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