What happened

Full speed ahead! Now reverse engines!

In the first few minutes of trading Wednesday, shares of Norwegian Cruise Line Holdings (NASDAQ:NCLH), Carnival Corporation (NYSE:CCL), and Royal Caribbean (NYSE:RCL) rushed forward in near lockstep, rising 11.3%, 11.5%, and 11.6% -- but the rally didn't last the hour. By 10:10 a.m. EDT, all three cruise lines had pared their gains back into the middle single digits, with Norwegian shares up only 4.4%, Carnival 4.8%, and Royal Caribbean 5.9%.

Seems investors can't make up their minds what's going on with the cruise industry today. But why can't they?

Three small cruise ships circling within a bay

Image source: Getty Images.

So what

Let's see if we can clear up the confusion. To begin with, have you noticed how close together all those numbers up above are? At their peak this morning, each stock was up about 11% and change. When they fell back, they fell back together as well, all to within less than a percentage point of 5%.

Clearly cruise stocks are moving as a group, and not based on how investors weigh their individual merits -- which isn't surprising. If you scan the newswires today, I think you'll find there's basically nothing there to support the idea that any of these companies is worth 11% more today than it was yesterday. About the only actual "new" news we see is an announcement from Carnival -- hardly unexpected -- that its AIDA Cruises subsidiary will not resume operation before August 1, 2020 at the earliest.  

(And I have to say, this buying and selling of cruise stocks en masse seems to back up my thesis, expressed yesterday, that investors are buying or selling cruise stocks based on whether they think the companies will go bankrupt, or not).

Now what

If that is the case, though, then what has investors thinking bankruptcy is less likely today than it was yesterday?

This morning, France and Germany suggested that the European Commission issue 500 billion euros (or about $550 billion) in public debt and "give that money as grants to the sectors most impacted by the pandemic," reports CBS MarketWatch. This could be good news for cruise stocks, which have been hit harder than most by the recessionAnd this is on top of other stimulus measures totaling some 540 billion euros, already agreed to by EU governments, designed to boost business activity and support the unemployed.  

That's the good news. Now here's the bad: All three of these cruise lines are headquartered in Miami -- pretty far from Brussels -- so they are unlikely to receive much direct European government support.

That being said, Morgan Stanley this morning noted that passage of the EU stimulus would help "the prospect of a synchronised recovery in Europe" in general. At the least, a stronger economy and lower unemployment in Europe should mean more customers able to afford to pay for cruises once cruise companies resume sailing. And given that Royal Caribbean does 17% of its business in Europe (says S&P Global Market Intelligence), while Norwegian (25%) and Carnival (30%) are even more exposed to Europe, broadly speaking at least, what's good for Europe's economy should be good for cruise line stocks as well.

And this is why cruise line stocks are up today -- even if they're not up quite so much as at first.