Why is the Zip share price bolting out the gate on Monday?

Zip shares are off to a flying start for the week.

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Key points

  • Zip shares rocketed 6.25% to 93.5 cents during the day but have since fallen back to 90 cents, up 2.27% during late afternoon trade 
  • The S&P/ASX 200 Financials (ASX: XFJ) sector is providing support, up 1.2% today 
  • Investors will be on the lookout for the US August consumer price index report that is set to be released on Tuesday night 

After Wall Street recorded strong gains last Friday, the Zip Co Ltd (ASX: ZIP) share price is storming out of the gate today.

This comes despite the buy-now, pay-later (BNPL) provider keeping a low profile since its full-year results.

Zip shares rose to an intraday high of 93.5 cents, up 6.25% but have since retraced as the day has gone on.

At the time of writing, its shares are swapping hands at 90 cents apiece, up 2.27%.

What's boosting Zip shares higher on Monday?

Investors are pushing up the Zip share price following an uplift across the S&P/ASX 200 Financials (ASX: XFJ) sector.

The index representing a wide range of financial services is currently up 1.2%. This makes it one of the biggest movers on the ASX.

Similarly, shares in Block Inc (ASX: SQ2) and Sezzle Inc (ASX: SZL) are up 4.34% and 3.88%, respectively.

The ASX appears to have shrugged off any concerns about an impending rate hike by the US Federal Reserve.

Economists are widely expecting the central bank to deliver its third consecutive 0.75 percentage point rate hike on 21-22 September.

The decision to increase interest rates is to combat the sky-high inflation that has been recorded in the US.

Nonetheless, investors will be closely watching the US August consumer price index report that is scheduled to be released Tuesday night. This report will provide crucial data on inflation in which the Fed will factor in ahead of its upcoming meeting.

The market is anticipating another 0.3% increase for August.

If this figure is higher, then it's more than likely the rally will end and shares will tumble.

On the other hand, if it is less than 0.3%, shares could extend their recent gains.

Zip share price recap

Over the past 12 months, the Zip share price has fallen 87%, with year-to-date down 79%.

A challenging external environment mixed with the company's widening credit losses and ballooning net losses has scared investors off.

Based on today's price, Zip presides a market capitalisation of around $605.43 million.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Block, Inc. and ZIPCOLTD FPO. 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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