The Block Inc (ASX: SQ2) share price is tumbling hard today, down 8.21% in morning trade.
Block closed on Friday trading for $105.80 per share and is currently trading for $97.11 per share.
It's not just the Block share price sliding today either.
Fellow ASX BNPL share Zip Co Ltd (ASX: ZIP) is down 7.22%, while Sezzle Inc (ASX: SZL) shares have fallen 6.11% since the opening bell.
The tech sector is facing a sharper selloff than the broader market, with the S&P/ASX 200 Index (ASX: XJO) down 2.09% compared to a 3.76% decline in the S&P/ASX All Technology Index (ASX: XTX).
Still, the Block share price, alongside its BNPL rivals, is leading the charge lower. What's going on?
Jerome Powell's hawkish words
As you're likely aware, Block shares are listed on both the NYSE and ASX. Block began trading on the ASX on 20 January after completing its acquisition of Afterpay.
And in Friday's trade in the US, the Block share price closed down 7.7% on the NYSE, with futures currently down another 1%.
The fall was part of a sweeping selloff that saw the tech-heavy NASDAQ finish Friday down 3.9%.
Investors were hitting the sell button after US Federal Reserve chair Jerome Powell delivered his much-awaited speech at the Jackson Hole central banking summit in the US state of Wyoming.
And investors hoping for some dovish signals were left wanting.
Powell reiterated the central bank's full intentions to bring inflation back into its target range, acknowledging this will bring some pain to the economy.
According to Powell:
Reducing inflation is likely to require a sustained period of below-trend growth. Moreover, there will very likely be some softening of labour market conditions. While higher interest rates, slower growth, and softer labour market conditions will bring down inflation, they will also bring some pain to households and businesses…
Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy.
US Treasury yields increased following Powell's speech.
Commenting on the market's reaction, which included the sharp selloff in the Block share price, Joe Gilbert, portfolio manager at Integrity Asset Management said (courtesy of Bloomberg):
Powell wants financial conditions to tighten further and wanted the market to know that the Fed is not ready to declare victory over inflation yet. He also renounced any prospects of interest rate cuts soon. The market is repricing this prospect.
Tech shares are particularly vulnerable to rising rates, as they're often priced with future earnings growth in mind. With higher rates, the present cost of those future earnings rises.
The Block share price likely took a bigger hit than many, because BNPL shares are especially vulnerable to the monetary tightening environment.
With rates looking to rise into 2023 across most of the developed world, a growing cohort of analysts is sounding warnings on the rise of bad debts amongst the BNPL players, already an Achilles heel for the sector.
Block share price snapshot
With today's intraday loss factored in, the Block share price is down a painful 45% since listing on 20 January. Over that same period, the ASX 200 had dropped 5%.
