The Block share price is down 7% on Friday. What’s going on?

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

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

The Block Inc (ASX: SQ2) share price is down 6.9% in late morning trade.

Block shares closed yesterday at $116.29 and are currently trading for $108.30.

Below we look at why the dual-listed global payment provider, which acquired Afterpay in January, again finds itself under pressure.

Why are investors hitting the sell button today?

There’s plenty of interest in Block shares today, with more than 5,400 trades already placed at the time of writing for a total value of some $10.9 million.

Those trades are bidding down the Block share price after the BNPL company’s NYSE listed stock plummeted 9.7% yesterday (overnight Aussie time). This came as the broader US tech sector also took another beating, with the Nasdaq closing the day down 2.8%.

Investors are keeping a close eye on US GDP numbers, with a slowdown in the economy having some analysts tipping that a recession may be nigh.

Investors are also on edge as they await the latest inflation figures (CPI) due out of the United States today (tonight Aussie time). If inflation in the world’s top economy surprises to the upside it will likely mean investors can expect more aggressive interest rate hikes from the US Federal Reserve.

Atop the much watched Fed, the European Central Bank (ECB) also flagged a series of rate rises ahead. While the ECB held fire yesterday, it indicated rates will rise by 0.25% next month, with more hikes ahead to tame inflation in the eurozone, currently running at 8%.

Higher rates tend to drag on equities, particularly growth shares like Block that are priced with higher future earnings in mind. According to CommSec, Block trades on a price to earnings (P/E) ratio of 105 times.

According to Liz Ann Sonders, chief investment strategist at Charles Schwab & Co (quoted by Bloomberg), “There’s a bit more chatter, call it whisper numbers, for the CPI being a little north of expectations. You add in a more hawkish stance by the ECB and you have another weaker day.”

Block share price snapshot

Block shares began trading on the ASX on 20 January.

Since then, the Block share price is down 39%. By comparison, the S&P/ASX 200 Index (ASX: XJO) is down 5% over that same time.

The post The Block share price is down 7% on Friday. What’s going on? appeared first on The Motley Fool Australia.

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More reading

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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