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.

| More on:
A woman sits at her computer with her hands clutched her the bottom of her face as though she may be biting her fingermails with a worried expression in her eyes and frown lines visible.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Block share price crashes 18% in morning trade
  • US inflation figures surprised to the upside
  • Investors are selling risk assets, eyeing potentially aggressive tightening from the US Fed

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 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.

More on BNPL shares

A group of six work colleagues gather around a computer in an office situation and discuss something on the screen as one man points and others look on with interest
BNPL shares

How does Zip’s ‘Operation Blue Sky’ stack up against Block’s battening down of the hatches?

The buy now, pay later industry is working on initiatives.

Read more »

A woman puts up her hands and looks confused while sitting at her computer.
BNPL shares

Why is the Zip share price behaving so strangely on the ASX today?

Zip shares have been wild on Thursday. What's going on?

Read more »

A woman with strawberry blonde hair has a huge smile on her face and fist pumps the air having seen good news on her phone.
BNPL shares

Sezzle share price soars 22% as BNPL company eyes profit target by year-end

We take a look at Sezzle's July update

Read more »

Upset woman with her hand on her forehead, holding a credit card.
Earnings Results

Sezzle share price tumbles 11% as losses deepen

The BNPL stock posted a deeper first half loss despite rising revenue and sales.

Read more »

Upset woman with her hand on her forehead, holding a credit card.
BNPL shares

Why is the Zip share price tumbling 6% on Tuesday?

Why are investors selling Zip shares?

Read more »

A picture taken from ground level focusing on the underside of a man's boot with the stylishly dressed man in the background wearing black amid a cold concrete background.
BNPL shares

Could Block’s ‘superpower’ be an Achilles’ heel for Zip shares?

Could Zip's BNPL focus be a weapon or a weakness?

Read more »

woman using affirm to pay
BNPL shares

Is this ASX 200 BNPL player focused on growth or less risk?

What's going on at Block?

Read more »

A business woman looks unhappy while she flies a red flag at her laptop.
BNPL shares

Top broker warns that the Zip share price could sink 43%

Are Zip's shares heading lower from here?

Read more »