What happened
It's been a wild day for fintech stocks. Shares of Upstart Holdings (UPST 2.94%), PayPal Holdings (PYPL 2.15%), and SoFi Technologies (SOFI 2.49%) started the trading day making significant gains, as a handful of banks released better-than-expected quarterly results this week. But investors reversed course by mid-afternoon and erased nearly all of the early gains the stocks had made after Philadelphia Federal Reserve President Patrick Harker said that "we are going to keep raising rates for a while" to tamp down sky-high inflation.
That's not what investors wanted to hear today. As a result, Upstart lost the 8% gains it made earlier in the day and was up by just 0.7%. PayPal reversed its 3.7% increase and was up by just 0.4%, while SoFi lost its earlier gain of 4% and was up by only 0.4% as of 3:10 p.m. ET.
So what
Investors started the day optimistic as they took into account the latest quarterly results from Bank of America, Bank of New York Mellon, and Goldman Sachs, which were released earlier this week. Each bank outpaced Wall Street's consensus estimates for their respective quarters, leading to a general sense of optimism in the market and for financial stocks, in particular.
Image source: Getty Images.
Investors added to that optimism earlier this morning on news that Netflix, IBM, and AT&T also beat consensus estimates for their latest quarters. The combination of strong financial results from large companies across two sectors buoyed stocks earlier in the trading day -- but the party didn't last long.
Harker also said in his speech that there's been a disappointing lack of progress in bringing inflation back down. He expects the Fed to keep interest rates elevated for a while, even after it's done raising them, "to let monetary policy do its work."
Those comments threw cold water on market indices today, sending the S&P 500 down 0.6% and the tech-heavy Nasdaq Composite down 0.4%, as of 3:11 p.m. E.T. Upstart, PayPal, and SoFi lost their momentum as a result, as investors began to fear once again that aggressive interest-rate hikes could cause too much damage to the economy and possibly spur a significant recession.
Many investors are now expecting the Fed to raise interest rates by an additional 75 basis points at its November meeting and potentially at its December meeting, as well.
Now what
The wild ride fintech investors took today is yet another example that the market continues to remain volatile. While share-price swings for Upstart, PayPal, and SoFi likely aren't over, it doesn't mean these companies are bad long-term investments. But it does mean that investors will have their patience tested as they hold onto these stocks.
Shareholders will get a better perspective on how each company is doing when they release their third-quarter results, which will be on Nov. 1 for SoFi, Nov. 3 for PayPal, and Nov. 8 for Upstart.
