Cloud zero: Xero share price is down 5% in 2 days

Xero shares have been falling. What’s going on?

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Key points

  • The Xero share price has fallen 5% in just two days 
  • Plenty of other ASX shares are also experiencing declines 
  • The prospect of rising interest rates could be the culprit 

The Xero Limited (ASX: XRO) share price has dropped 5% over the last two days.

Considering the market capitalisation of Xero is $15.7 billion (according to the ASX), this decline represents hundreds of millions of dollars.

Xero shares are seeing red, just like plenty of other ASX shares on the stock market. At the time of writing, the S&P/ASX 200 Index (ASX: XJO) is down by 0.6%.

Today, the WiseTech Global Ltd (ASX: WTC) share price is down 5.4%, the Novonix Ltd (ASX: NVX) share price is down 5.2%, the Block Inc (ASX: SQ2) share price is down 4.1%, the Webjet Limited (ASX: WEB) share price is down 3.9% and the Pro Medicus Limited (ASX: PME) share price is down 3.1%.

There haven’t been any announcements out of the company recently that could have affected the Xero share price. However, it is due to hand in its FY22 full-year result on 12 May 2022.

What is causing the ASX share market to be volatile?

Inflation and interest rates are getting much more investor attention these days.

The JPMorgan Chase & Co (NYSE: JPM) CEO recently told shareholders that interest rates could go much higher than what the market is expecting.

A number of Australian economists now believe that June could be the month when interest rates start increasing in Australia, according to the Australian Financial Review.

Why do interest rates matter for the Xero share price? Or any asset price?

Billionaire Ray Dalio, founder of Bridgewater Associates, once said about interest rates and asset valuations:

It all comes down to interest rates. As an investor, all you’re doing is putting up a lump sum payment for a future cash flow.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Block, Inc., Pro Medicus Ltd., WiseTech Global, and Xero. The Motley Fool Australia owns and has recommended Block, Inc., Pro Medicus Ltd., WiseTech Global, and Xero. The Motley Fool Australia has recommended Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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