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Why Credit Card Stocks Jumped Today

By Joe Tenebruso - Mar 10, 2020 at 5:25PM

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The prospect of tax cuts sparked a relief rally.

What happened

Shares of Mastercard (MA -0.51%), Visa (V -0.95%), Discover Financial (DFS -0.55%), and Capital One (COF -0.45%) all rose more than 5% on Tuesday, as hopes for tax cuts fueled investor optimism.

So what

The Dow Jones Industrial Average (^DJI -0.20%) 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.

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Stocks Mentioned

Capital One Financial Corporation Stock Quote
Capital One Financial Corporation
COF
$109.60 (-0.45%) $0.49
Mastercard Incorporated Stock Quote
Mastercard Incorporated
MA
$328.83 (-0.51%) $-1.67
Visa Inc. Stock Quote
Visa Inc.
V
$203.56 (-0.95%) $-1.95
Discover Financial Services Stock Quote
Discover Financial Services
DFS
$98.63 (-0.55%) $0.54
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$31,438.26 (-0.20%) $-62.42

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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