The Afterpay Ltd (ASX: APT) share price may be under pressure today following the US market's heavy tech-driven selloff.
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What happened to the Nasdaq overnight?
The Nasdaq Composite (NASDAQ: .IXIC) closed 3.02% lower on Thursday night as rising 10-year Treasury yield rates continued to threaten equity markets.
The global economy is showing signs of life as vaccine efforts attempt to put COVID-19 at bay. As economic growth starts to pick up the pace, inflation is likely to follow suit.
And when inflation starts to pick up, so does the question of whether or not central banks need to increase interest rates. The recent advance in yields reflects the anticipation of higher inflation and interest rate hikes being brought forward.
Tech and growth sectors are most sensitive to rising interest rates. While these are the stocks that outperformed the market when yields were crashing, they could also be the ones to underperform when yields rise.
What does this mean for the Afterpay share price?
Since mid-February, the Afterpay share price hasn't been able to catch a break lately, losing ~30% of its value. Its shares have continued to face mounting pressure today, down 2.6% at the time of writing.
It appears Afterpay's recent weakness is largely outside its control, with the S&P/ASX Information Technology (INDEXASX: XIJ) slumping 13.60% in the past month.
The US tech-heavy selloff on Thursday night could spark further weakness in the Afterpay share price. This, in turn, could be exacerbated by the heavy selling of the third-largest buy now, pay later player in the US, Affirm Holdings Inc (NASDAQ: AFRM).
The Affirm share price finished the overnight session down 8.26% to a near all-time low of $74.39. Its shares debuted on the Nasdaq back on 13 January 2021 at an initial public offering (IPO) price of US$39. Affirm's shares closed at $97 on the first day of listing before running to as high as $146.90 just one month later.
The recent concerns over rising interest rates and weakness in tech shares have managed to erase all of Affirm's gains.
