Carvana Co. (CVNA) stock is pushing higher Wednesday as markets wait on a Federal Reserve decision that's expected to deliver a third straight interest rate cut. But here's the thing: for Carvana, this particular Fed meeting matters more than it does for most companies.
What's Actually Happening
CME FedWatch data shows a 25-basis-point cut is essentially baked in for today's meeting. That's not the interesting part. What investors are really watching for is the Fed's forward guidance, specifically whether Chair Jerome Powell signals this easing cycle is wrapping up.
The concern is what analysts are calling a "hawkish cut," where the Fed delivers the rate reduction but Powell indicates the committee is shifting to a slower, more cautious approach going forward. If the updated economic projections show just one rate cut expected for 2026, that would be a meaningful change from what the market has been pricing in.
Why Carvana Cares So Much
Carvana's business model is doubly exposed to interest rate movements, which makes today's decision particularly important for the company.
On the consumer side, lower rates help solve the affordability problem facing used car buyers. When the federal funds rate drops, auto loan rates eventually follow, which means lower monthly payments and, theoretically, more people able to afford vehicles. That's straightforward demand stimulus for Carvana's core business.
But there's another layer. Carvana makes money by originating auto loans and then selling them to investors through the asset-backed securities market. In a lower-rate environment, the spread Carvana captures on these securitizations typically widens, which directly improves its Gross Profit Per Unit. Lower rates also reduce the variable interest costs of holding vehicle inventory.
So Carvana benefits twice: once from increased consumer demand, and again from better economics on the financing side.
The Hawkish Scenario
Here's where things get tricky. If Powell signals that the Fed is hitting the brakes on further easing and rates will stay higher for longer, the aggressive cost-of-capital relief investors have been anticipating could materialize much more slowly than expected. That would complicate Carvana's recent rally.
Market data underscores how bullish sentiment has been heading into this decision. The stock carries a Growth score of 99.16 and a Momentum score of 90.32, reflecting strong technical and fundamental optimism.
Where the Stock Stands
Carvana shares were up 1.01% at $460.79 at the time of publication Wednesday, trading at a new 52-week high.
From a technical standpoint, the stock is running about 32.2% above its 50-day moving average of $349.40 and roughly 49.1% above its 200-day moving average of $309.74. That kind of distance from moving averages signals a strong bullish trend and suggests the stock has built considerable momentum.
Whether that momentum can continue depends largely on what Powell says this afternoon about the path forward for rates.