What happened
Shares of the Brazilian digital bank Nu Holdings (NU 2.16%) rose today along with many other tech stocks as investors took a break from their worries over inflation and future rate hikes. Nu Holdings rose 5.4%, and the Nasdaq Composite index ended the day 2.14% higher.
So what
Oil prices and longer-term bond yields fell today, which is a sign that investors were a little bit less concerned about inflation, at least for today.
The move seemed to be at least partly triggered by comments from Lael Brainard, vice chair of the Federal Reserve, in a speech Wednesday.
"At some point in the tightening cycle, the risks will become more two-sided," Brainard said. "The rapidity of the tightening cycle and its global nature, as well as the uncertainty around the pace at which the effects of tighter financial conditions are working their way through aggregate demand, create risks associated with overtightening."
Investors seemed to take this to mean that while the Fed is absolutely committed to bringing down inflation, it is aware of the associated risks of raising interest rates.
As a digital bank largely operating in Brazil, Nu Holdings is impacted by inflation. A little bit of inflation would likely help the digital bank, but too much could raise loan losses and stunt spending.
Now what
I didn't see anything company-specific driving Nu higher, but I do like the stock at these levels. Nu is a digital banking disruptor in Latin America and has already garnered more than 65 million customers with its low-fee products and sleek digital interface.
The stock may face pressure in the near term along with other banks and fintech companies, but I like it as a long-term buy and hold.
