What happened
Shares of Block (SQ +0.39%) -- formerly known as Square -- spiked by as much as 12% during early trading Tuesday. But by mid-afternoon, the fintech company's stock had given back most of those gains.
As of 3:06 p.m. ET, it was up by 3.3%.
So what
It's likely that some investors rushed to pick up shares of Block early in the session after the company's share price plunged by 16% Monday.
Image source: Getty Images.
Part of what drove Monday's decline was the news that a handful of analysts had lowered their price targets for Block. It's likely that the stock also moved in sympathy with Bitcoin, which fell below $33,000. Block's Cash App allows users to buy and sell Bitcoin, and the company continues to focus more of its attention on the crypto space.
But the stock likely gave up most of the gains it made earlier in the day as investors continued to worry about high inflation, rising interest rates, and the outlook for the U.S. economy.
The Federal Reserve raised the federal funds rate this month by 50 basis points as part of its ongoing effort to curb inflation. But the Fed has said it expects to implement a steady stream of rate hikes this year and in 2023, and investors are concerned that those inflation-fighting moves could end up slowing the economy down too much, or even cause a recession.
Now what
Block shareholders have had to be extremely patient. The stock has fallen 62% over the past 12 months. Moreover, they may need to keep being patient.
Inflation is still high, and the Fed will continue raising benchmark interest rates this year -- both of which will likely put a damper on investor enthusiasm over the short term. That doesn't mean Block won't end up being a good long-term investment, but shareholders should prepare for more price swings from this fintech stock.
