Stock markets were mixed today with little economic or earnings news to drive trading. The one notable news item in the last 24 hours was the Federal Reserve "stress test" finding that 29 of the 30 largest U.S. banks would be able to continue lending in a severe recession. The only bank to fail was Salt Lake-City based Zions Bancorporation.
As of 3:30 p.m. EDT the Dow Jones Industrial Average (DJINDICES:^DJI) was up 0.11%, while the S&P 500 and Nasdaq Composite were both down for the day.
A federal appeals court ruled today that the Fed was reasonable in setting debit card swipe fees, reversing a ruling last year that may have resulted in fees lower than the current $0.21 per swipe cap. What the ruling didn't do is end the court battle between retailers and banks that charge the swipe fees. The court said the law was written poorly and more clarification is needed to determine the appropriate cap.
A pending appeal from retailers could go as high as the Supreme Court. For now, fees will stay where they are, which relieves some pressure Visa and MasterCard may have felt if the cap was lowered.
Why MasterCard is underperforming Visa today
You might think VIsa and MasterCard would rise together because both companies would benefit from higher swipe fees. But Visa would actually benefit more from the fees due to its higher market share in debit cards. If banks were forced to raise fees for consumers having debit cards, this could have meant a shift toward credit cards, where MasterCard holds a higher market share, or other payment methods.
That's why MasterCard isn't seeing the Visa's pop today. Whether the ruling will actually have a positive effect on Visa or a negative effect on MasterCard is yet to be answered. Remember that the court battle isn't over. For today, though, the market sees Visa as the big winner.