The stock market was having a strong day on Thursday, but fintech giant Square (SQ 6.19%) was a major standout. As of 3 p.m. EST, shares had risen by 10% to about $222, making back all of what they lost in this week's slump.
There are several catalysts that could be driving Square higher today. For one thing, the overall stock market is strong, and the financial sector as a whole is performing well. As an indicator, the Financial Select Sector SPDR ETF (XLF -0.66%) was higher by 2.5% for the day, significantly outperforming the S&P 500.
In addition to the general market strength, here's what could be giving Square a lift:
- There's reason to believe consumer spending is strengthening, which is a positive catalyst for Square's merchants and its Cash App business. Mastercard (MA -1.10%) reported that transaction volume through its network grew by 11%, 10%, and 7% year over year in the first three weeks of January, respectively. That's an acceleration over November and December.
- The recent volatile gains in stocks like GameStop are boosting interest in retail trading, plus brokerage app Robinhood announced trading restrictions on some of the most high-interest stocks. Both could be positive catalysts for Cash App, which allows users to buy and sell stocks.
- Bitcoin and other cryptocurrencies are rising sharply. Square not only has some bitcoin on its balance sheet, but allows Cash App users to buy and sell the digital currency.
One important takeaway is that this is not a short squeeze like we're seeing elsewhere in the market. There are some good reasons for this upward move we're seeing in Square, and if Robinhood users actually start to migrate to the Cash App's trading platform, it could certainly be a needle mover for Square's business.