CarMax's Huge Earnings Miss Sends Warning Signal on US Consumer
Comment of the Day

September 29 2022

Commentary by Eoin Treacy

CarMax's Huge Earnings Miss Sends Warning Signal on US Consumer

This article from Bloomberg may be of interest to subscribers. Here is a section:

“CarMax has reminded Wall Street that parts of the economy are already in a recession,” said Ed Moya, senior market analyst at Oanda Corp. The “affordability challenges” highlighted by the company as the main reason for the big miss suggests it is “only going to get worse as Fed tightening starts to impact the economy,” Moya added.

And

“When you combine these results with the story from yesterday that demand for iPhones is weak, it raises the question about the consumer as we move toward the holiday selling season,” said Matt Maley, chief market strategist at Miller Tabak + Co. “If the consumer is weak, you can take a soft landing off the table.”     

And

“The story of CarMax’s second-quarter is clear: demand destruction,” said Morgan Stanley analyst Adam Jonas. “High used car prices and rising rates are causing a buyers’ strike.”

Eoin Treacy's view

Let’s not forget it takes between six to nine months for tighter monetary policy to show up in the real economy. The Fed started raising rates in March and added 300 basis points to the base rate since then.

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