What happened
Shares of Block (SQ 0.51%), the company formerly known as Square, traded with volatility today as the afternoon got underway. The stock fell 4% this morning and then was 1.6% up, as of 12:10 p.m. ET. There is no obvious reason for the move.
So what
Like many growth stocks, Block has struggled as the Federal Reserve has moved to end its bond purchases started early in the pandemic and then raise interest rates, potentially as soon as March now. The Fed also noted yesterday in its minutes that it may move to shrink its balance sheet, effectively removing liquidity from the system, soon after it begins rate hikes.
Image source: Getty Images.
Block is now well below its 52-week low stock price and is down considerably since rebranding from Square to Block.
The company operates in a lot of sectors that have really fallen out of favor with investors in recent months. It's a fintech, a sector that has been hammered since November. The name change to Block also appears to be in reference to the company's growing experimentation with crypto-related ideas, and cryptocurrencies are hurting just like tech and growth stocks right now. Block also has a large buy now, pay later (BNPL) business after buying the company Afterpay for $29 billion. BNPL has come under huge scrutiny from investors.
What now
Right now, a lot of sectors Block operates in are struggling as investors readjust their portfolios to adapt to the Fed's new plans and outlook. Long-term, I am sure the company will be fine, but it will likely face near-term pressure.
