Topline
Shares of Carvana and Beyond Meat surged Friday, making them the latest companies to be rewarded by investors after announcing layoffs or cost cuts in recent weeks amid a challenging economic environment, as Wall Street analysts have largely cheered the cost-saving measures.
Key Facts
Shares of Beyond Meat surged nearly 22% despite the plant-based foods maker reporting dismal quarterly revenue and profits, with investors apparently optimistic about the company’s plans to save costs by laying off 4% of its workforce.
Online used-car retailer Carvana’s stock jumped 40% on Friday, a day after saying that it is aggressively reducing costs as consumer demand takes a hit from high inflation and the prospect of a recession.
Shares of popular stock trading app Robinhood rose 12% Wednesday after it reported dismal second-quarter earnings along with a 23% reduction of the company’s workforce, as Wall Street analysts widely cheered the cost-cutting measures.
E-commerce platform Shopify’s stock, meanwhile, is up roughly 30% since warning of lower consumer spending and announcing layoffs on July 26, although its shares initially plunged up to 14% on the news before rebounding.
In late July, Bloomberg reported that automaker Ford planned to cut 8,000 employees as part of its transition toward electric vehicles—the stock rallied 2% on the day and is up nearly 20% since then.
Even Tesla’s stock, which has fallen precipitously since April, ticked up 1% after the company announced a small wave of layoffs July 12, weeks after CEO Elon Musk warned he had a “super bad feeling” about the economy and would reduce 10% of the company’s workforce.
Crucial Quote:
Even as “businesses increase layoffs to cut costs,” the U.S. 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 does note that higher interest rates—following two consecutive 75-basis-point increases from the Federal Reserve—are “weighing heavily on business investment.”
Key Background:
Recession fears receded as the U.S. economy added 528,000 jobs in July—up from 398,000 in June, far surpassing the 258,000 expected by analysts, according to new data from the Bureau of Labor Statistics on Friday. The unemployment rate, meanwhile, fell to 3.5%, back to February 2020 pre-pandemic levels, showing that the labor market remains strong despite fears of a recession.
What To Watch For:
“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 layoff/hiring freeze announcements has been jumping),” says Vital Knowledge founder Adam Crisafulli.
Further Reading:
Stocks Under Pressure Despite Strong Jobs Report As Investors Fear Bigger Fed Rate Hikes (Forbes)
Tesla’s 3:1 Stock Split Wins Shareholder Approval—Here’s What It Means For Investors (Forbes)
AMTD Digital Plunges Nearly 30%—Stay Away From This ‘Absolute Scam,’ Expert Warns (Forbes)
Here’s Why More Fed Officials Are Warning That The Market Is Getting Ahead Of Itself (Forbes)