What happened

The stock market is rallying for a third consecutive day after the massive $2 trillion stimulus package was agreed upon by key leaders. As of 11:30 a.m. EDT, the Dow Jones Industrial Average and S&P 500 index were up by 5.1% and 4.6%, respectively.

Some financial service companies were having an especially strong day, particularly those in the credit card industry. Discover Financial Services (DFS 0.87%), Capital One (COF 0.90%), and American Express (AXP 6.22%) are among the strongest performers, up 14%, 14%, and 9% for the day.

Hands holding three different credit cards and choosing one.

Image source: Getty Images.

So what

First, it's important to realize that all three of these companies are credit card lenders. Unlike with Visa and Mastercard, which are third-party payment processors, when you swipe your American Express card, Amex is loaning you the money for the purchase. Amex and Discover act as both payment processors and lenders, while Capital One is a large bank that happens to have one of the largest credit card lending operations in the market.

Simply put, the stimulus is likely to be very good news for any company in the business of lending money. Among other things, the stimulus provides immediate cash payments to most U.S. households, expands unemployment benefits, and suspends student loan payments for six months.

Now what

One of the biggest worries among bank investors since the coronavirus-fueled market crash started has been an uptick in loan defaults due to consumers having trouble paying their bills. To put it mildly, the financial security the stimulus will provide to the most vulnerable Americans should make any rise in loan delinquencies far milder than it otherwise would have been.