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Why is the Block share price crashing 18% on Tuesday?

Higher than expected inflation figures out of the US have investors fretting over potentially outsized interest rate rises.
The post Why is the Block share price crashing 18% on Tuesday? appeared first on The Motley Fool Australia. –

The Block Inc (ASX: SQ2) share price is plummeting in morning trade, down by 17.74% to $90.21.

It’s far from just Block shares in the red today, though.

The S&P/ASX 200 Index (ASX: XJO) is also down 4.94% at the time of writing.

And in a sign that the growth-focused tech sector is feeling the heat, the S&P/ASX All Technology Index (ASX: XTX) is down 6.96%.

Still, the Block share price is down a good bit more than that.

Why is the ASX-listed global payment giant selling off again?

Block shares are listed on both the New York Stock Exchange and ASX.

Block (with the ticker SQ on the NYSE), acquired Afterpay back in January and has been under relentless selling pressure since October.

The ASX-listed shares (SQ2) began trading in January and have been spiralling lower since March amid the spectre of rising interest rates.

The Block share price is tumbling again today after inflation figures out of the United States surprised to the upside on Friday.

Analysts had been predicting, and hoping, that inflation had peaked after figures dropped to 8.3% in April from 8.5% in March. But the numbers on Friday went the other way, with the latest consumer price index (CPI) figures coming in at 8.6% for May.

Inflation in the world’s top economy is running at the hottest level in more than 40 years.

That means the US Federal Reserve will almost certainly increase the benchmark interest rate by another 0.50% this Wednesday, as Fed chair Jerome Powell has previously flagged.

Analysts are now also increasing their bets the Fed might raise rates by 0.75% to get ahead of the curve. That would be the biggest rate hike from the world’s most-watched central bank in 28 years.

Circling back to the Block share price, the tech-heavy Nasdaq plummeted 4.7% on Monday (overnight Aussie time). Growth-oriented tech shares priced with future earnings in mind led the charge lower, as they’re more exposed to moves in rates.

Buy now, pay later (BNPL) stocks are even more vulnerable to higher interest rates, potentially increasing their levels of bad debts amid lower demand as consumers rein in their spending. With those pressures and others in mind, investors sent Block’s NYSE shares down by a painful 12.7% on Monday.

As the ASX was closed for the Queen’s Birthday holiday yesterday, Block’s ASX shares are now following suit on Tuesday.

Block share price snapshot

Over the past month, the Block share price is down by around 21%. That compares to a one-month loss of almost 7% posted by the ASX 200.

The post Why is the Block share price crashing 18% on Tuesday? appeared first on The Motley Fool Australia.

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More reading

ASX 200 midday update: Block and Zip crash amid market selloff
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Why Block, Evolution, Fortescue, and Magellan shares are sinking today

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Block, Inc. The Motley Fool Australia has positions in and has recommended Block, Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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