Please ensure Javascript is enabled for purposes of website accessibility

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

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

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

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

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.