Why Mastercard’s stock price fell on Tuesday

What happened

Shares of MasterCard (MY -1.25%) rebounded on Tuesday, rising 2.7% shortly after the market opened, then falling as much as 1.8% by mid-afternoon, ending the day down 1.3% at 286.48 $.

It was a mixed day on Wall Street as the Dow Jones Industrial Average was down 126 points (0.45%) and the S&P500 fell by 8 points (0.2%), but the Nasdaq increased by 27 points (0.3%).

So what

The credit card giant jumped higher in early trading on Tuesday following news that Mastercard was launching a new credit card with DoorDash (DASH 0.83%) — the very first for the food delivery service. Mastercard will be the exclusive credit card network for the DoorDash Rewards Mastercard, which will allow cardholders to earn benefits and earn rewards for purchases on and off the DoorDash platform. Chase, owned by JPMorgan Chase (JPM -0.88%)will issue the card.

It extends Mastercard’s relationship with Chase and DoorDash, as the three have been working together since January 2020 to offer DashPass benefits on select Chase Mastercard credit cards.

Investor sentiment changed later in the morning following a speech by Chicago Federal Reserve Bank Chairman Charles Evans in London. Evans said the Fed board will need to raise interest rates to between 4.50% and 4.75% to get inflation under control. (He previously advocated for rates to peak at 4%, a less aggressive stance.) After September’s 75-point rate hike, the fed funds rate is between 3% and 3.25%.

“Reducing inflation will likely require an extended period of below-trend growth, and there will most likely be some easing in labor market conditions. But this is necessary to bring inflation back to our 2% target.” , said Evans.

Now what

This more restrained assessment of terms was certainly not good news for many companies, including Mastercard, which relies on consumer spending to generate revenue. Gross domestic product (GDP) is expected to end the year with 0.2% growth, according to Fed projections, and grow 1.2% next year. The Fed projects that GDP growth will not return to historical trend lines until 2024.

The biggest issue for Mastercard is a bill making its way through the House and Senate that could potentially disrupt the duopoly Mastercard enjoys with Visa. (V -1.51%)like the two major credit card networks. It’s unclear when the Credit Card Competition Act of 2022 will pass in either house, but both have bipartisan sponsorship. The bill would require banks with assets over $100 billion to process credit transactions on no less than two unaffiliated networks and at least one that is neither Visa nor Mastercard. This legislation is intended to create more competition between credit card networks and ultimately put pressure on fee rates.

This would certainly have a significant impact on Mastercard if passed, so keep an eye on this bill.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Dave Kovaleski has no position in the stocks mentioned. The Motley Fool holds positions and recommends DoorDash, Inc., JPMorgan Chase, Mastercard and Visa. The Motley Fool has a disclosure policy.

Eleanor C. William