Sector Snap: Credit card stocks sink

Wall Street remained strained ahead of a planned House vote on an unpopular $700 billion plan to rescue troubled financial companies and investors also mulled over Citigroup Inc.'s FDIC-facilitated takeover of Wachovia Corp.'s banking operations.

"We believe consumers feel and act worse than recent macro data would suggest," wrote Citi Investment Research analyst Bradley Ball in a note to clients. "Spending trends have shown a sizable drop-off in discretionary areas like travel and entertainment, as even high-end consumers have tightened their belts."

With weaker spending hurting credit card companies' revenue, several firms have reduced their exposure in higher-risk geographies and are only targeting high-end customers, Ball said.

Ball revised his fiscal 2008 earnings estimate for Discover Financial down 6 cents to $1.44 per share and lowered his 2009 earnings estimate to $1.45 per share from a prior forecast of $1.60 per share. He also lowered his target price on the company's shares to $13 from $14.

Discover Financial shed 31 cents, or 2.2 percent, to $13.55 in morning trading Monday.

Ball revised his fiscal 2008 profit estimate for American Express down 10 cents to $2.75 per share and lowered his 2009 earnings estimate to $2.95 per share from a prior forecast of $3.15. He cut his price target on American Express shares by 50 cents to $39.50.

American Express shares slid $2.68, or 6.5 percent, to $36.92.

Other credit cards companies saw losses as well. Capital One Financial Corp. fell $3.46, or 6.3 percent, to $51.09; MasterCard Inc. lost $15.56, or 8.4 percent, to $169.51; and Visa Inc. shed $3.19, or 5.1 percent, to $58.85.