What happened
Shares of Lemonade (LMND 1.44%), an AI-powered insurance company, popped earlier this week as investors processed the news of better-than-expected earnings reports from banks.
Lemonade is considered a fintech stock and investors viewed the banks' reports as an indication that the financial sector may be more robust than previously thought. As a result, shares jumped and were still up by 8.5% for the week as of midday Friday, according to data provided by S&P Global Market Intelligence.
So what
Earlier in the week, Bank of America, Bank of New York Mellon, and Goldman Sachs all reported quarterly financial results that beat Wall Street's consensus estimates. That helped lift Lemonade's stock by 8% on Tuesday.
Image source: Getty Images.
Investors were hoping that strong bank earnings could indicate that the U.S. economy isn't in as bad of shape as they had originally feared. With inflation at a near 40-year high and the Federal Reserve focused on hiking interest rates to bring it down, investors have been worried that aggressive rate increases will slow down the economy too much.
That would be bad news for any company in the financial space, including Lemonade, so when shareholders saw the latest bank data, they were encouraged.
Now what
While Lemonade's stock was up by as much as 15% earlier in the week, its share price has lost some ground since then.
Investors likely latched onto comments made by Philadelphia Federal Reserve President Patrick Harker yesterday, who said that "we are going to keep raising rates for a while."
Harker said in his speech that the Fed hasn't made enough progress on bringing inflation down and that rates will stay elevated for a while. That worried investors, and some are now expecting 75-basis-point hikes at the Fed's meetings in both November and December.
While investors were swayed by various news items this week, Lemonade will report its latest financial results on Nov. 9, which will give shareholders a clearer picture of how the company is doing right now.
