Shares of Etsy (ETSY 1.30%) were pulling back today, in line with a broader sell-off in stocks, on concerns about rising interest rates as investors look ahead to tomorrow's fed funds rate decision.
Separately, a lukewarm analyst note also seemed to weigh on the artisan-based online marketplace.
As of 2:42 p.m. ET, the stock was down 6.3%.
Treasury yields were spiking today in anticipation of tomorrow's rate hike. Most investors are expecting the Federal Reserve to raise the benchmark fed funds rate by 75 basis points to a target range of 3% to 3.25%. Though the rate hike is largely baked in to current stock prices, commentary from Fed Chairman Jerome Powell on future rate hikes is likely to move the market.
The benchmark 10-year Treasury yield was up 2% today to 3.56%, its highest point since 2011, while the two-year Treasury yield approached 4%. That inversion, meaning the two-year yield being higher than the 10-year yield, is also seen as a sign that a recession is coming.
As a growth stock dependent on consumer discretionary spending, Etsy is more sensitive to the macroeconomy, and therefore interest rates, than most stocks.
Also today, Bank of America initiated coverage on Etsy with a neutral rating and a price target of $120. While that price target actually implied modest upside of about 8% in the stock price before today's decline, analyst Curtis Nagle said he's cautious on a reacceleration of growth due to tough comparisons and a high macro risk.
Like a number of growth stocks, Etsy shares have been volatile over the last year, falling nearly 80% before bouncing about 50% off those lows in the last few months.
Etsy's overall business looks strong as the company has little direct competition in its niche of e-commerce. However, Nagle is right that it faces difficult comparisons. Gross merchandise sales actually fell slightly in its most recent quarter, and the company's guidance for the current quarter was modest as well.
After Etsy's sales jumped by triple digits during the pandemic, investors will have to adjust their expectations for more modest growth ahead.