What happened
Shares of several consumer-focused fintech stocks rose today, as investors digested new economic data and thoughts on the economy from several prominent experts.
Shares of the artificial intelligence lender Upstart Holdings (UPST 7.99%) traded more than 12% higher as of 1:17 p.m. ET today. Meanwhile, shares of the Brazilian digital bank Nu Holdings (NU -3.23%) also traded roughly 12% higher, and shares of the Brazilian payments company StoneCo (STNE 0.30%) were up 7%.
So what
Despite concerns over a slowing economy, jobless claims once again declined last week, according to new data from the U.S. Department of Labor. Unemployment applications fell by 11,000 and totaled only 200,000 for the week ending May 28, which are historically low levels, despite high inflation.
Image source: Getty Images.
On the flip side, new data also released today from the payroll processing company ADP showed that jobs in the private sector grew by only 128,000 in May, a huge miss on economist estimates and a big decline from the 202,000 jobs created in April. This is the slowest job growth seen since the COVID-19 recovery began.
"Under a backdrop of a tight labor market and elevated inflation, monthly job gains are closer to pre-pandemic levels," said Nela Richardson, ADP's chief economist. "The job growth rate of hiring has tempered across all industries, while small businesses remain a source of concern as they struggle to keep up with larger firms that have been booming as of late."
Upstart, Nu, and StoneCo are also rising as investors try and understand where the U.S. economy may be headed in 2023, which has a big impact on consumer-facing companies.
Just yesterday, JPMorgan Chase CEO Jamie Dimon warned investors of the economic "hurricane" to come in light of Russia's ongoing invasion of Ukraine and the Federal Reserve's massive quantitative tightening effort, which recently began and will essentially drain liquidity from the economy.
"You better brace yourself. JPMorgan is bracing ourselves and we're going to be very conservative with our balance sheet," Dimon said at a conference yesterday.
However, following Dimon's comments, Bank of America CEO Brian Moynihan downplayed concerns about the economy.
"We're in North Carolina," he said at the same conference Dimon spoke at. "You've got hurricanes that come every year."
Furthermore, Moynihan said that the reason the Fed can so aggressively raise interest rates and begin quantitative tightening is due to the fact that the economy is in a really good place when you look at current unemployment and consumer spending trends.
Now what
Considering Upstart, Nu, and Stone's stocks are all down between 45% to 64% this year, some of the economic concerns that Dimon spoke about may be priced in to a certain extent, and investors may be thinking a bottom is near. Fintech and tech stocks have certainly been hit hard this year on the whole.
StoneCo will also report earnings results for the first quarter of 2022 after the market closes today, so investors may be anticipating a good report. Analysts on average expect StoneCo to report $0.04 earnings per share on total revenue of nearly $378 million.
Ultimately, of these three stocks, I only own Nu and am excited about the way the company is disrupting the Latin American banking landscape.
