Why is the Zip share price up 5% on Tuesday?

The Zip Co Ltd (ASX: ZIP) share price is climbing today, providing investors with some much-needed relief amid its steep sell-off year to date.

The ASX BNPL share is currently trading for 64 cents each, 4.92% higher than yesterday’s closing price.

Zip’s share price is outperforming the financial sector today. The S&P/ASX 200 Financials Index (ASX: XFJ) is the second-worst-performing sector at the time of writing, up 0.47%.

Meantime, Zip’s BNPL peers aren’t enjoying similar lifts. The Block Inc. (ASX: SQ2) share price is down 0.3% while Sezzle Inc. (ASX: SZL) shares are faring a little better, up 1%.

So why are Zip’s shares rallying on Tuesday? Let’s investigate.

Shares rise on potential interest rate pivot

Some investors believe the next rate hike by the US Federal Reserve will not be as severe as previous increases, as reported by The Australian Financial Review.

The consensus is the Fed will increase interest rates by 0.75 percentage points at its next meeting this week.

There are also clues that its anticipated December interest rate hike could be in the range of a 0.50 percentage point increase. This would provide relief to growth stocks such as Zip, as well as the broader market.

Market movements may be showing clues

This is the observation of Morgan Stanley strategist Michael Wilson. Excerpts of Wilson’s research note on the matter appeared in an article published by Bloomberg on Monday.

Wilson pointed toward the recent rally in US equities over the past fortnight as a sign the Fed’s fiscal tightening could be starting to wane, with the S&P 500 (INDEXSP: .INX) gaining 5.28% over this period.

“This kind of price action isn’t unusual toward the end of the cycle particularly as the Fed moves closer to the end of its tightening campaign, something we think is approaching,” Wilson said.

Wilson also pointed toward the inversion of the yield curves of 10-year and three-month treasury bonds as a sign that they “all support a Fed pivot sooner rather than later”.

Back home in Australia, the market placed a bet that there’s a 22 per cent chance the RBA will raise interest rates to 3.1% later today, but some analysts believe it could be as low as 2.85%.

Zip share price snapshot

The Zip share price is down a painful 85% year to date. That’s a far cry from the S&P/ASX 200 Index (ASX: XJO) which is down around 7% over the same period.

The company’s market capitalisation is around $455 million.

The post Why is the Zip share price up 5% on Tuesday? appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• These ASX 200 energy shares are leading the market higher on Tuesday
• Guess which was the best-performing ASX ETF in October
• Why are Origin shares burning 4% brighter today?
• Why is the Brickworks share price sliding lower on Tuesday?
• Why I think today’s cheap ASX dividend shares can double over the next 10 years

Motley Fool contributor Matthew Farley 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.

from The Motley Fool Australia https://ift.tt/xgSy9Xb