Why Confluent shares are falling hard today

What happened

Shares of confluent (NASDAQ: CFLT), a data-streaming company, today came across some seemingly inconclusive company-specific information. Instead, investors were likely selling their stocks as the tech sector in general continued to pull back due to economic uncertainty.

The tech stock fell 12.4% today and 8.2% as of 2:28 p.m. ET.

So what

Today’s drop in stocks comes as investors continue to weigh the potential economic effects of the conflict in Eastern Europe. But tech investors in general were nervous even before the fighting between Russia and Ukraine began.

Image source: Getty Images.

Tech stocks have fallen lately as some investors have dumped riskier growth stocks in search of more stable places to put their money. The tech-heavy Nasdaq Compound is down 11% in the last six months.

Investors are increasingly concerned that inflation is at its highest level in 40 years and they are likely concerned that rising prices could hamper consumer spending and in turn hurt growth in the economy.

The Federal Reserve is expected to raise interest rates this month, and throughout the year, to curb inflation. But investors fear it could also hamper economic growth.

When investors are preoccupied with economic growth, riskier stocks — like fast-growing tech stocks — seem less desirable. It’s one of the reasons Confluent’s stock price has fallen 27% in the past six months.

Now what

Confluent investors should likely prepare for more market volatility in the coming months. With interest rate hikes underway, inflation eating away at workers’ paychecks and uncertainty stemming from the conflict in Eastern Europe, the market is likely to continue to be erratic.

That doesn’t mean Confluent isn’t still a good long-term investment, but it does mean that investors may need to weather short-term stock price volatility.

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Chris Neiger has no position in the stocks mentioned. The Motley Fool owns and endorses Confluent, Inc. The Motley Fool has a Disclosure Policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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