What happened
Shares of Mastercard (MA 1.11%), Visa (V 0.94%), Discover Financial (DFS +0.00%), and Capital One (COF +1.96%) all rose more than 5% on Tuesday, as hopes for tax cuts fueled investor optimism.
So what
The Dow Jones Industrial Average (^DJI +1.24%) 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.
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.
