The Block Inc (ASX: SQ2) share price is down 5.7% in morning trade.
The global buy now, pay later (BNPL) stock closed yesterday trading for $115.15 per share. Shares are currently swapping hands for $108.59 apiece.
This comes as the All Ordinaries Index (ASX: XAO) is also giving up some of its recent gains, down 0.9%.
Hereâs whatâs putting extra pressure on the ASX BNPL share today.
Why is the Block share price plunging today?
The Block share price is falling on the back of the latest interest rate hike from the United States Federal Reserve, announced overnight Aussie time.
The latest 0.25% rate boost â the ninth consecutive hike from the central bank â takes the official US cash rate to 5.0%.
Though widely anticipated, the rate hike saw the tech-heavy Nasdaq Composite Index (NASDAQ: .IXIC) close down 1.6%.
As you may know, Block, which acquired Afterpay in January last year, is dual-listed in Australia and the United States. And the Block share price fell 6.2% on the NYSE yesterday.
The BNPL company has proven highly sensitive to the higher interest rate environment.
Higher rates throw up some stiff headwinds to growth stocks priced with future earnings in mind. As the cost of money rises, so too does the cost of investing in that future revenue.
And higher rates, of course, also will increase the cost of servicing the companyâs debts. Not to mention likely see an increase in bad debts from some of its already stressed customers.
The Block share price may be even more sensitive to rate increases as regulators debate stringent new regulations for the pay by instalment sector. Those may subject Block and other BNPL companies to the same rules as credit card companies.
How has Block been performing?
As you can see in the chart below, the Block share price fell off a cliff during the early months of global interest rate increases. 2023 has been far more rewarding for the shareholders, with the stock up 18% year to date despite todayâs slide.
The post The Block share price just plummeted 6%. Here’s why appeared first on The Motley Fool Australia.
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More reading
- Here are the top 10 ASX 200 shares today
- Why is the Zip share price soaring 7% today?
- Why is the Block share price racing higher on Wednesday?
- Why are ASX 200 tech stocks like Xero having such a stellar start to the week?
- Why Block, BrainChip, Core Lithium, and Life360 shares are racing higher
Motley Fool contributor Bernd Struben 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. The Motley Fool Australia has positions in and has recommended Block. 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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