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Why Payments Stocks Had A Rough Monday – And Are Speed Bumps Ahead?

On a day where pretty much everywhere you looked, stocks were in the red – across sectors and across large, mid and small caps – it might be hard to find standouts.


Look beyond the rough patch in evidence from, say, SAP – and where tech-focused companies were down for the day, we can see that payments-related companies were significantly lower than the NASDAQ, which was off 1.6 percent, or the broader S&P, which slid 1.8 percent.

Payments-related stocks were down a bit more. PayPal was down 2.8 percent on the day. So was Fiserv. Visa slipped 2.4 percent. Mastercard was 3.5 percent lower. American Express was down a relatively weighty 4 percent.

You get the picture. The question, of course, is why. And in this case, we contend that the slides had less to do with tech malaise than with worries overspending itself.

We’ll know a bit more when Mastercard and Visa put up their results, scheduled for this week. And recall that American Express, and big banks such as J.P. Morgan, showed at least some traction in consumer (specifically, card-related) spending over the past few months and into the current environment.

But past need not always be prologue, and there are signs that the willingness to spend will hit some speed bumps – or perhaps the speed bumps are right here, right now.

Stimulus Stalemate

At a high level, compromise remains elusive on Capitol Hill over a new stimulus bill that would extend new lifelines to the unemployed and to the small businesses that make up Main Street.

COVID-19 cases are surging here in the States and in Europe, which means the gradual reopening that we have seen over the past few months may be ephemeral. If businesses shutter, by choice or by mandate, that short-circuits at least some revenue streams, which means layoffs will mount – which, of course, will put strong headwinds in place for consumer spending.

And, of course, that would hit payments companies … right into the holiday season.

As we’ve seen through PYMNTS research (in conjunction with PayPal), consumers expect the pandemic to last until nearly a year from now – at least in terms of when things will return to “normal.” That may put a brake on some of the optimism that has recently been signaled by SMBs surveyed at the half-year mark, where a majority of firms think they’ll be able to stay open through the pandemic.

But unemployment remains stubborn. In the latest round of data, filings for new jobless claims in the U.S. stood at 787,000 in the week that ended Oct. 17. That’s better than the 875,000 filings that had been expected, and nearly the lowest total since the early days of the coronavirus pandemic.

But then again, the improvement in that metric does not capture the shift that had been seen earlier in the month, of individuals who have run through unemployment benefits and then pivoted to the Pandemic Unemployment Assistance emergency program, which rocketed by more than 509,000 individuals to 3.3 million as they sought to take advantage of the extra 13 weeks of benefits.

For payments companies (and, by extension, their stocks), much may hinge, then, on what happens on the Hill – for better or worse.

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