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Why Shares of Mastercard Are Falling Today

By Bram Berkowitz – Jul 19, 2021 at 1:37PM

Key Points

  • Lower spending due to slower economic growth or pandemic lockdowns would not bode well for Mastercard, one of the world's largest payments companies.
  • The Dow Jones Industrial Average had dropped roughly 900 points at one time today.

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The company appears to be declining along with the broader market amid macroeconomic and pandemic-induced concerns.

What happened

Shares of Mastercard (MA 1.16%) traded 5.2% lower as of 1:25 p.m. EDT today for no obvious reasons other than broader macroeconomic factors and market sentiment.

So what

Shares of the payments company dipped as the broader market got creamed today due to concerns over rising cases of the COVID delta variant across the country. At one point, the Dow Jones Industrial Average had tumbled roughly 900 points as the market panicked about the potential for slower economic growth and even potential lockdowns.

While you might see the Mastercard logo on many of your debit and credit cards, the company does not make credit card loans, but is instead a global payments company that facilitates transactions. Therefore, it makes money based on total spend volume, so slower economic growth and potential lockdowns are not good for the company.

Person looking at squiggly red line trending downward.

Image source: Getty Images.

Now what

In recent months, Mastercard stock has hit new highs as the economy has reopened and spending levels have surpassed those in 2019. The company reported recently that U.S. retail sales excluding automotive and gasoline increased 11% in June on a year-over-year basis and 10.4% compared to June 2019. E-commerce growth also continued to perform well, up 8.3% year over year.

This should bode well for when the company reports second-quarter earnings at the end of the month. The further adoption of digital payments should also be a good sign for the company.

While the increase in new COVID delta variant cases is quite concerning, it's still probably too early to know whether the recent uptick will slow economic growth or result in lockdowns. I still like the long-term prospects for Mastercard, given its digital capabilities and strong track record.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Mastercard. The Motley Fool has a disclosure policy.

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