What happened

Shares of Mastercard (MA 0.95%), Visa (V 0.05%), Discover Financial (DFS -0.89%), and Capital One (COF -1.05%) all rose more than 5% on Tuesday, as hopes for tax cuts fueled investor optimism.

So what

The Dow Jones Industrial Average (^DJI -0.22%) gained more than 1,100 points after news broke that President Trump pitched a 0% payroll tax rate to Republican lawmakers, which could potentially go into effect for the rest of 2020. 

A tax cut of that magnitude would be likely to spur consumer spending, helping to offset the expected fallout from the COVID-19 coronavirus epidemic. Much of that spending would probably take place on debit and credit cards, such as those from Visa, Mastercard, Discover, and Capital One.

A person pointing to an upwardly sloping digital chart.

Credit card stocks rebounded on Tuesday. Image source: Getty Images.

Now what

Anything that boosts consumer optimism and spending is likely to be a boon for credit card companies. Many of these stocks have seen their prices fall sharply in recent days, as investors have grown more concerned regarding the potential for the COVID-19 outbreak to lead to a sharp downturn in the global economy. Should tax cuts help to ward off a recession in the U.S., the digital payment companies will no doubt benefit.