What happened
Fintech stock Affirm Holdings (AFRM -2.08%) had quite the up-and-down trading session on Tuesday. After optimism spread through the sector following an encouraging earnings release from one peer, darker news from another dampened the rally. At the end of the day, Affirm's share price was down by more than 3%; this was notably worse than the 0.4% slide of the S&P 500 index.
So what
The good news peer in question is SoFi Technologies, which before market open published an estimates-beating third quarter.
But then fellow member of the fintech club Upstart Holdings showed up to ruin the party. That company revealed in a regulatory filing that it aims to terminate 140 of its hourly employees, citing current economic conditions and -- more worryingly -- a decline in its loan volumes.
Affirm is not Upstart, however both companies swim in the same economic waters. The factors leading Upstart to reach for the pink slips are also putting pressure on Affirm. Both companies are very sensitive to the interest rate hikes that have been a Federal Reserve habit this year, and look to continue.
Higher interest rates mean higher costs for lenders, which can drive customers away and reduce demand. Although Affirm's specialty -- buy now, pay later consumer lending -- is a bit different than other forms of loans, its demand is nevertheless dependent on interest rates.
Now what
Affirm hasn't officially reacted to Upstart's termination announcement, but you can bet that management is well aware of this development. In many ways the fintech sector is oversold by worried investors, and Affirm and other stocks in the industry have real potential at their beaten-down prices. Such developments as Upstart's, though, won't help improve sentiment anytime soon.
