It was a bad day for the markets overall as the Dow Jones Industrial Average was down about 650 points in early afternoon trading, while the S&P 500 was down 2.3%, and the Nasdaq Composite was down 2.8%.
There were a few factors that impacted Block on Friday. Early Friday morning, several news organizations, including Reuters, reported that Block and its buy now, pay later business, Afterpay, ended its relationship with Australian bank Westpac Banking Corp. The Afterpay app had been available to Westpac banking customers as part of its banking-as-a-service platform. But Block decided to pull Afterpay from the bank, and it will now look to roll out its Cash App service in Australia.
"Our decision to move in this new direction is due to our exciting next chapter with Block, particularly as we think about Cash App opportunities here in Australia," Lee Hatton, head of the Money by Afterpay app, told Reuters.
But Block's stock price started falling in the late morning and early afternoon, along with the rest of the market, following Federal Reserve Board Chair Jerome Powell's speech at the Fed's Jackson Hole Economic Symposium.
The market had been anticipating Powell's speech all week, expecting a hawkish view toward lowering inflation -- and that's what he delivered Friday. Powell said the Fed will "use our tools forcefully" to bring down inflation, which means don't expect any loosening of interest rate policy any time soon. And Powell acknowledged that it could bring some pain:
While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.
A slight glimmer of good news came Friday as the U.S. Bureau of Economic Analysis (BEA) personal consumption expenditures (PCE) report for July showed a slight 0.1% drop from June. Also, the year-over-year rise was 6.3%, down from 6.8% in June.
But the bigger news of Powell's speech on inflation sent most stocks tumbling, including Block, on fears of an economic slowdown.