Mastercard stock (NYSE:MA) fluctuated on Tuesday, jumping 2.7% early after the market began, then dropping as much as 1.8% in the afternoon before closing down 1.3% at $286.48.
The Dow Jones Industrial Average was down 126 points (0.45%), and the S&P 500 was down 8 points (0.2%), but the Nasdaq was up 27 points (0.3%).
So, What Happened to Mastercard Stock??
The credit card giant rose in early trade on Tuesday after it was revealed that Mastercard was introducing a new credit card with DoorDash (DASH), the first for the food delivery service. The DoorDash Points Mastercard will be issued by Mastercard as the official credit card network, allowing cardholders to get advantages and earn rewards for transactions made on and off the DoorDash platform. The card will be issued by Chase, which is owned by JPMorgan Chase (JPM).
It strengthens Mastercard’s partnership with Chase and DoorDash, as the three have collaborated since January 2020 to offer DashPass benefits on select Chase Mastercard credit cards.
Later that morning, following a speech in London by Charles Evans, president of the Chicago Federal Reserve Bank, investor sentiment shifted. Evans believes the Fed Board should raise interest rates from 4.50% to 4.75% to keep inflation under control. (Previously, he advocated for rates to peak at 4%, a more cautious stance.) The federal funds rate is now in the 3% to 3.25% range, following a 75-point rate hike in September.
“Reduced inflation will almost certainly need a protracted period of below-trend growth, as well as some easing of labor market conditions. However, this is required to return inflation to our target of 2%, “Evans stated.
So, what now?
This more realistic appraisal of the situation was unwelcome news for many businesses, including Mastercard, which depends on consumer spending to generate revenue. According to Fed predictions, GDP will increase by 0.2% this year and 1.2% the following year. According to the Fed, GDP growth will not revert to historical trend lines until 2024.
The larger worry for Mastercard stock (NYSE:MA) is a law that is making its way through the House and Senate that might undermine Mastercard’s duopoly with Visa (V -1.51%) as the two leading credit card networks. It is unclear when either house will vote on the Credit Card Competition Act of 2022, but both have bipartisan support. The law would force banks with more than $100 billion in assets to handle credit transactionson two or more independent networks, one of which would not be Visa or Mastercard. This law aims to increase competition among credit card networks and, as a result, put downward pressure on charge rates.
If it succeeds, it will undoubtedly have a substantial influence on Mastercard stock (NYSE:MA), so keep a watch on this bill.
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Author Okoro Chinedu 