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Here's Why Visa, Mastercard, Discover, and Capital One Stocks Are Falling on Friday

By Matthew Frankel, CFP® - Mar 27, 2020 at 12:33PM

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Credit card companies are getting hit especially hard to end an otherwise strong week.

What happened

After three consecutive days in the green, the stock market isn't exactly ending the week on a high note. The Dow Jones Industrial Average and S&P 500 are down by 3.7% and 3.3%, respectively, as of 11:50 a.m. EDT.

As we've seen on several occasions recently, the financial sector is doing even worse, especially when it comes to companies involved in the credit card industry. Payment processing giants Visa (V 1.16%) and Mastercard (MA 0.88%) are down by 4% and 6%, respectively. Meanwhile, Discover (DFS 3.29%) and Capital One (COF 2.52%), which actually lend money to consumers, have fallen 9% and 7%, respectively.

Man and a woman laying in front of a laptop and using a credit card to shop online

Image source: Getty Images.

So what

In a nutshell, it appears that coronavirus-fueled recession worries are overpowering the expected benefits of the stimulus package, at least in today's trading session. In recessions, consumers spend less, which hurts payment processors like Visa and Mastercard, as they get a percentage of the payment volume they process on their networks.

Also, during tough times, consumers often have difficulties paying their bills, so companies like Capital One could see a rise in delinquencies and charge-offs. Discover acts as both a payment processor and a lender, so it could take a hit on both sides of the business, which could be why its stock down more than the other three companies' shares.

Now what

There are too many unanswered questions surrounding the COVID-19 pandemic, which is why we're seeing violent swings in the stock market. There's simply no way to know for sure how long the outbreak will last, how bad the resulting recession will be, or how much the stimulus will be able to help consumers weather the storm.

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Stocks Mentioned

Capital One Financial Corporation Stock Quote
Capital One Financial Corporation
COF
$106.82 (2.52%) $2.63
Mastercard Incorporated Stock Quote
Mastercard Incorporated
MA
$318.24 (0.88%) $2.76
Visa Inc. Stock Quote
Visa Inc.
V
$199.18 (1.16%) $2.29
Discover Financial Services Stock Quote
Discover Financial Services
DFS
$97.69 (3.29%) $3.11

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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