What happened

Thursday was an interesting day for the stock market. After plunging by nearly 2% in the morning, the Dow Jones Industrial Average and S&P 500 index abruptly reversed course and headed into positive territory.

The rally was largely fueled by a major reversal in the financial sector, and credit card stocks were an especially strong part of the market. American Express (NYSE:AXP) was higher by more than 6% as of 3 p.m. EDT, while Discover Financial Services (NYSE:DFS) and Capital One (NYSE:COF) were doing even better, up by 7% and 8%, respectively.

Two young women paying for purchases with a credit card.

Consumers are spending more money, which could be a good sign for the post-coronavirus economy. Image source: Getty Images.

So what

There doesn't seem to be any company-specific news fueling the rally in these stocks. Instead, today's gains seem to be the result of investor optimism that the economic effects of COVID-19 could be less detrimental than expected to the credit card industry.

On Wednesday afternoon, payment processing giant Mastercard (NYSE:MA) reported some recent data showing that consumer spending may be improving significantly. In the week ending May 7, Mastercard's U.S. switched payment volume was only 6% lower than the same week a year ago, significantly better than the 26% year-over-year decline it saw three weeks prior. And as you can see in this chart, there's a clear uptrend:

Week Ending

Change in U.S. Switched Payment Volume (YOY)

April 7

(22%)

April 14

(26%)

April 21

(15%)

April 28

(12%)

May 7

(6%)

Data source: Mastercard. YOY = year over year.

Furthermore, Mastercard's management had some very encouraging words for the economy as a whole.

"With an additional two weeks of activity, we believe that we are starting to see the transition from the Stabilization phase to the Normalization phase in some markets, although it is very early days," management said. "The Normalization phase occurs when these restrictions are relaxed and spending begins to gradually recover from the new lower levels, with some sectors recovering faster than others."

Now what

Here's why this is important. A slow but definitive return to normal levels of payment activity, especially to the extent that Mastercard has reported for the past few weeks, may indicate that American consumers are in better financial shape than previously thought.

The reason why credit card lenders have been some of the stock market's worst performers in the pandemic has been the fear of a surge in consumer delinquencies and loan charge-offs. In a deep recession, consumers could struggle to pay their bills, and credit card debt is one of the most sensitive types of lending in these times.

As a final point, it's worth mentioning that these three stocks are still significantly down for the week. Even after today's rally, all three are down by 6% or more this week alone. So, investors aren't wildly optimistic about the pandemic's effects on these credit card lenders -- they're just a little less pessimistic than they were.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.