What happened

Affirm Holdings (AFRM -2.08%) was falling again on Thursday, down about 5.5% at 11:30 a.m. ET. It had fallen as much as 8.3% in the morning trading session.

All the major indexes were down on Thursday morning, with the S&P 500 down about 1% as of 11:30 a.m. EDT.

So what

For Affirm, a buy now, pay later company, it was more fallout from yesterday's subpar earnings report from one of its key partners, Target. The big-box retailer posted underwhelming third-quarter numbers on Wednesday, as it missed analysts' estimates.

"In the latter weeks of the quarter, sales and profit trends softened meaningfully, with guests' shopping behavior increasingly impacted by inflation, rising interest rates, and economic uncertainty. This resulted in a third-quarter profit performance well below our expectations," Chairman and CEO Brian Cornell said in the earnings release.

But it was Target's outlook for the fourth quarter that spooked investors even more. The retailer lowered its guidance for fiscal 2022 based on the softening sales and profit trends that have persisted into November. In the earnings release, the company said it was girding for a "wide range of sales outcomes in the fourth quarter, centered around a low-single-digit decline in comparable sales."

Affirm was down yesterday on the news, with investors feeling it could impact Affirm's fourth-quarter numbers. That sentiment seems to be prevailing today as well.

Now what

The market also may have reacted negatively to a speech by St. Louis Federal Reserve Bank President James Bullard on Thursday in Louisville. Bullard said the change in monetary policy appears to have has "only limited effects on observed inflation, but market pricing suggests disinflation is expected in 2023." He added that rates are not yet "sufficiently restrictive" and will need to be increased further.

He suggests that even a more dovish stance would see rates peak in the 5% range, while a more hawkish one could be result in rates climbing up to around 7%.

Affirm is certainly hoping for the lower end of that range. While the company continues to grow its numbers of active users and gross merchandise volumes, high expenses keep it from being profitable.

Affirm also lowered its guidance for fiscal year 2023, citing interest rates, a volatile economic environment, and a "pronounced slowdown" with a large merchant partner: Peloton