Shares of Carvana and Beyond Meat rose Friday, making them the latest companies to be rewarded by investors after announcing layoffs or cost-cutting in recent weeks in a challenging economic environment as Wall Street analysts broadly applauded the cost-cutting measures.
Shares of Beyond Meat were up nearly 22% despite the plant-based food maker reporting dismal quarterly sales and earnings, with investors apparently optimistic about the company’s plans to cut costs by laying off 4% of its workforce. .
Carvana’s online used car inventory rose 40% on Friday, a day after he said it is aggressively cutting costs as consumer demand is hit by high inflation and the prospect of a recession.
Shares of the popular stock trading app Robinhood rose 12% on Wednesday after it reported dismal second-quarter results along with a 23% cut in the company’s workforce, as Wall Street analysts widely applauded the cost-cutting measures.
The stock of the ecommerce platform Shopify, meanwhile, is up about 30% since the consumer spending warning and layoffs announcement on July 26, though shares initially fell to 14% on the news before rebounding.
In late July, Bloomberg reported that automaker Ford was planning to cut 8,000 employees as part of its move to electric vehicles — the stock rose 2% on the day and has since jumped nearly 20%.
Even Tesla shares, which have fallen rapidly since April, rose 1% after the company announced a small wave of layoffs on July 12, weeks after CEO Elon Musk warned he had a “super bad feeling” about the economy and 10% of his company’s workforce.
Even if “companies are increasing layoffs to cut costs,” the US economy is “not in a recession” as consumer spending still remains solid for now, LPL Financial chief economist Jeffrey Roach argues in a recent note. He notes, however, that higher interest rates — following two consecutive 75 basis point hikes by the Federal Reserve — are “weighing heavily on business investment.”
Fears of a recession eased as the US economy added 528,000 jobs in July, up from 398,000 in June, far more than the 258,000 analysts had expected, according to new data from the Bureau of Labor Statistics on Friday. The unemployment rate, meanwhile, fell to 3.5%, back to pre-pandemic levels in February 2020, showing that the labor market remains strong despite fears of a recession.
What to pay attention to:
“It’s really hard to reconcile this jobs report with other data (including the weekly claims) and anecdotal reports from companies (where the number of layoffs/freeze announcements has risen),” said Adam Crisafulli, founder of Vital Knowledge.
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