The stock market was having a rough day on Wednesday. As of 3 p.m. EDT, the Dow Jones Industrial Average and S&P 500 index were lower by 2.6% and 2.3%, respectively.
Credit card stocks were among the market's worst performers. American Express (NYSE:AXP) lost 6.5% of its value with an hour left in the trading session, while Capital One (NYSE:COF) and Discover (NYSE:DFS) got hit even harder, as both were down by about 8%.
This has been a recurring theme throughout the COVID-19 pandemic. When it appears that the economic impact of the virus could be worse than expected, stocks go down, and financial stocks typically get hit especially hard. There isn't any company-specific news fueling the downward move in any of these three stocks, and that's a very important point for investors to know.
Today, the plunge is being fueled by negative comments by a few experts. Federal Reserve Chairman Jerome Powell said that there's significant downside risk and that more needs to be done to support the economy. Then, billionaire investor David Tepper said that the market is one of the most overvalued that he's ever seen.
With credit card companies, the short explanation is that credit card loans are a particularly recession-prone type of debt. When consumers run into tough times, they tend to pay their more "essential" debts like mortgages and car loans first, and if something needs to go unpaid, credit cards are a logical candidate.
While the economic impact of the novel coronavirus is very real, it is important to take comment-fueled moves with a grain of salt. I'm not sure that anyone didn't think there was downside risk to the economy right now, and it's important to keep in mind that billionaire investors are wrong on a fairly regular basis.