What happened

Shares of Mastercard (MA 1.33%) bounced around on Tuesday, rising 2.7% shortly after the market opened, then falling as much as 1.8% in midafternoon, only to end 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&P 500 was down 8 points (0.2%), but the Nasdaq was up 27 points (0.3%).

So what

The credit card giant jumped higher in early trading on Tuesday after the news came out that Mastercard was launching a new credit card with DoorDash (DASH 1.64%) -- the first ever for the food delivery service. Mastercard will be the exclusive credit card network for the DoorDash Rewards Mastercard, which will allow cardmembers to get benefits and earn rewards for purchases on and off the DoorDash platform. Chase, owned by JPMorgan Chase (JPM 1.44%), will issue the card.

It extends Mastercard's relationship with Chase and DoorDash as the three have worked together since January 2020 to offer DashPass perks on certain Chase Mastercard credit cards.

Investor sentiment turned later that morning following a speech by Charles Evans, the president of the Chicago Federal Reserve Bank, in London. Evans said the Fed Board will need to raise interest rates to the 4.50% to 4.75% range to tame inflation. (Previously, he had advocated rates to peak at 4%, a less aggressive stance.) After September's 75-point rate hike, the federal funds rate is in the 3% to 3.25% range.

"Reducing inflation is likely to require a sustained period of below-trend growth, and there will most likely be some softening of labor market conditions. But this is necessary to restore inflation to our 2 percent target," Evans said.

Now what

This more sober assessment of conditions was certainly not welcome 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 forecasts GDP growth won't return to historical trend lines until 2024.

The bigger issue for Mastercard is a bill that is working its way through the House and Senate that would potentially disrupt the duopoly that Mastercard enjoys with Visa (V 0.65%)as the two primary credit card networks. It is not clear when the Credit Card Competition Act of 2022 will come to a vote in either chamber, but both have bipartisan sponsorship. The bill would require banks with assets of more than $100 billion to process credit transactions on no fewer than two unaffiliated networks and at least one that is neither Visa nor Mastercard. This legislation seeks to create more competition among credit card networks and, ultimately, put pressure on fee rates.

It would certainly have a significant impact on Mastercard if it passes, so keep an eye on this bill.