What happened

Well, how was that for a U-turn? Yesterday, the Federal Reserve announced a 0.75% rise in its interest rate target, and the stock market turned green. Cruise stock investors joined in the cheering, and shares of Carnival Corporation (CCL -0.42%), Royal Caribbean (RCL 1.23%), and Norwegian Cruise Line Holdings (NCLH 0.66%) all climbed higher.

Today, the opposite is happening. The stock market is glowing bright red, and so are the cruise stocks, with Carnival shares falling 10% as of 11 a.m. ET, Norwegian Cruise stock down 9.1%, and Royal Caribbean shares shedding 8.8%.

So what

So what exactly is going on here, and what does it mean to cruise stock investors? Basically, the story goes like this: Up until a few days ago, investors were expecting the Fed to raise interest rates 0.5% in an attempt to tamp down rising inflation. (The idea being that when you raise interest rates, people take out fewer loans, buy less stuff, spend less -- and this decrease in demand results in lower prices, and less inflation).

But then the U.S. got hit by its highest inflation rise in 41 years, spooking the Fed into raising interest rates even more -- the aforementioned 0.75% raise. Luckily for investors, the Fed had telegraphed this possibility ahead of time, so when rates were in fact raised 0.75% yesterday, the market took that in stride. But now we hear that the Fed is contemplating a second 0.75% hike in July, and a plan to raise interest rates by a total of perhaps 3.375% through the end of this year.    

Investors are spooked once again, and they're selling off stocks in response.

Now what

This is actually not a surprising reaction. Consider that if the Fed does go through with a 0.75% rate hike in July, and then perhaps lets up on the brake just a tad at its subsequent September meeting and raises rates 0.5% then, this would still leave Carnival, Royal Caribbean, and Norwegian Cruise facing the prospect of paying two full percentage points more on their debt ... than they were expecting to pay as recently as last month.

For Carnival, that works out to about $725 million more in interest payments on its $36.2 billion debt. For Royal Caribbean, investors can count on profits being lower (or losses higher) by $462 million given that company's $23.1 billion debt. And Norwegian Cruise Line Holdings, the smallest of the three cruise operators, can expect to take an additional $285 million hit from higher interest rates.

Result: Crunching the numbers with help from data from S&P Global Market Intelligence, it appears that over the course of a year, these higher interest rates have the potential to consume as much as a full quarter's worth of forecast operating profit at Royal Caribbean -- and nearly a quarter's worth of income at Carnival and Norwegian Cruise.

Does that prospect justify a sell-off in cruise stocks today? I think it does.