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Visa Chief Executive Joseph Saunders, in a conference call with analysts, said the payment processor would introduce a network participation fee in the United States for all of its debit, credit and prepaid card services.

As part of the new policy, Visa also will lower the variable rate charged for transactions.

Visa's shift away from per-transaction fees is a large departure for the San Francisco-based company. It is being done in advance of new fee caps that take effect later this year as part of the 2010 Dodd-Frank financial reform law.

Saunders did not disclose what the participation fee will be, but said it will be based on a merchant's size, and the merchants' number of locations. He also said the new fees did not rule out future price changes.

Due to the overhaul and the new fee caps imposed by Dodd-Frank, Saunders said 2012 will be a "low point" for debit card processing fees.

"We won't do as well as we have," he said.

The new program comes as Visa reported better-than-expected fiscal third quarter results, and plans to buy back an additional $1 billion in shares over the next year.

For Visa, the quarterly results highlight consumers' increasing reliance on debit and credit cards rather than cash or checks to make everyday purchases.

"They're getting better results as consumers are shifting from paper to plastic," said Shannon Stemm, a financial services analyst with Edward Jones.

Analysts said the company's continued profits drove the new share buyback program, following a similar $1 billion share buyback announced in April and completed in the fiscal third quarter.

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Visa on Wednesday reported fiscal third-quarter net income of $1 billion, or $1.43 per Class A common share, up from $716 million, or 97 cents per share, a year ago.

Excluding the one-time, noncash gain on its Visa Europe put option, Visa earned $883 million, or $1.26 per share.

Analysts estimated Visa would report net income of $1.23 per share, according to Thomson Reuters I/B/E/S.

Total operating revenue increased 14 percent to $2.3 billion from a year ago.

Total payment volumes increased 17 percent to $941 billion from $802 billion.

Visa's international business is becoming a larger portion of its quarterly results. Payments outside the U.S. -- $422 billion -- accounted for 44 percent of Visa's third quarter volume, up from 41 percent a year ago, when such payments totaled $333 billion.

Visa shares closed down 1.6 percent, or $1.45, at $87.75 on the New York Stock Exchange before results were announced.

(Reporting by Joe Rauch; Editing by Steve Orlofsky, Phil Berlowitz and Carol Bishopric)

The Commerce Department said on Wednesday durable goods orders dropped 2.1 percent, weighed down by weak receipts for transportation equipment, after a 1.9 percent increase in May.

Excluding transportation, orders edged up 0.1 percent after gaining 0.7 percent in May.

Durable goods are items ranging from toasters to aircraft that are meant to last three years or more.

Economists had expected overall orders to rise 0.3 percent.

"It is indicative of the lingering effects of this soft patch that we've had here recently where businesses remain very cautious with regard to building any kind of stocks in anticipation of increasing final sales," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

Treasuries prices pared earlier losses on the data, while the dollar extended losses against the yen.

Durable goods orders are a leading indicator of manufacturing. Though orders tend to be volatile, last month's unexpected decline could add to fears of a slowdown in factory activity.

Manufacturing has been the bright spot in the economy, whose recovery has faltered since the start of the year.

Data on Friday is expected to show the economy grow at a 1.8 percent annual rate in the second quarter, according to a Reuters survey, after expanding 1.9 percent in the January-March period.

Orders last month were pulled down by an 8.5 percent drop in orders for transportation equipment. That reflected a 28.9 percent plunge in aircraft orders.

Boeing received 48 aircraft orders, up from 27 in May, according to information posted on the plane maker's website. However, the bulk of the orders were for its less expensive models.

Motor vehicle orders dropped 1.4 percent as manufacturers continue to deal with disruptions to production following the earthquake in Japan. Motor vehicle orders rose 0.3 percent in May.

Outside of transportation, orders for machinery fell 2.3 percent, while primary metals rose 1.0 percent. Capital goods orders fell 4.1 percent, while computers and electronic products edged up.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, slipped 0.4 percent last month after a revised 1.7 percent rise in May.

Economists had expected a 0.8 percent gain from a previously reported 1.6 percent increase.

Shipments of non-defense capital goods orders excluding aircraft, which go into the calculation of gross domestic product, rose 1.0 percent after increasing 1.7 percent in May.

A separate report showed demand for loans to purchase houses fell for a third straight week to the lowest since late February, suggesting home sales will remain weak.

The Mortgage Bankers Association said its mortgage purchase index fell 3.8 percent last week.

(Reporting by Lucia Mutikani, Editing by Andrea Ricci)

Declining issues solidly outpaced advancing ones, even though major averages showed mostly modest declines.

A failure to raise the U.S. debt limit by an August 2 deadline could roil markets and hurt the economy if the United States puts off paying bills. Democrats and Republicans continued to joust on Tuesday over which side's plan has the better chance of passage.

"Investors believe that there's going to be a resolution at the 11th hour, but many of those investors are starting to get cold feet," said Hugh Johnson, chief investment officer of Hugh Johnson Advisors LLC in Albany, New York.

Just 6.53 billion shares changed hands on the New York Stock Exchange, NYSE Amex and Nasdaq, below the daily average of 7.49 billion.

Technology stocks again outperformed after Broadcom Corp (BRCM.O) reported strong results on Monday night, the latest in a string of chip companies to delight investors. The stock jumped 9.4 percent to $38.20.

Shares of top Chinese search engine Baidu Inc (BIDU.O) rose 5 percent to $164.36, a day after it forecast revenue well ahead of Wall Street expectations.

The SPDR Technology Select Sector Index exchange-traded fund (XLK.P) up 0.3 percent.

Second-quarter earnings that have been mostly stronger than expected have offered protective armor for a market battered by the debt debate.

At the close, the Dow Jones industrial average .DJI was down 91.50 points, or 0.73 percent, at 12,501.30. The Standard & Poor's 500 Index .SPX was down 5.49 points, or 0.41 percent, at 1,331.94. The Nasdaq Composite Index .IXIC was down 2.84 points, or 0.10 percent, at 2,839.96.

The CBOE Volatility Index .VIX, Wall Street's gauge of investor anxiety, rose 4.6 percent and broke above a 20 reading. The index could be pricing in a U.S. debt downgrade, according to optionMonster analyst Chris McKhann.

Among investors, retail clients appear more anxious than institutional ones over the failure of lawmakers to reach a deal on the debt ceiling, said Charles Lieberman, chief investment officer of Advisers Capital Management, LLC in Hasbrouck Heights, New Jersey.

"Retail investors I think are more easily scared, and they expressed concern," he said. "When we discussed the various options with them, they typically come to the conclusion there isn't a whole lot we can do to deal with the circumstances. Anything we can do could backfire."

Weighing on the Dow were shares of 3M Co (MMM.N), the conglomerate whose products range from Post-It Notes to specialty films for computers and televisions. Its share dropped 5.4 percent to $89.93, hurt by softness in some divisions even though its results met estimates.

It exerted a 38-point drag on the Dow, accounting for more than half of losses of the 30-component index on the day.

Industrial stocks were among the worst performers, with the S&P industrials index .GSPI down 1.9 percent.

Also, Ford Motor Co (F.N) fell 1.8 percent to $12.93, even after the automaker's second-quarter earnings beat expectations. Ford remained cautious about consumer demand going forward.

Among other decliners, Netflix Inc (NFLX.O) slid 5.2 percent to $266.91, a day after the movie rental company warned its red-hot subscriber growth would cool in the third quarter.

On the New York Stock Exchange, decliners outweighed advancers by about 2-to-1, while Nasdaq losers beat winners also by about 2-to-1.

After the close, tech results were mixed, with shares of Amazon.com (AMZN.O) gaining more than 6 percent after it reported a surge in quarterly revenue. Shares of Juniper Networks Inc (JNPR.N), however, declined 12.9 percent to $27.15 after its preliminary results disappointed.

(Additional reporting by Doris Frankel; Editing by Leslie Adler)