What happened

After four consecutive up days, the S&P 500 finally took a breather on Thursday, closing the day off 0.4%. But not all stocks fell; some ended today quite a lot higher.

Of particular interest to investors betting on the economy's recovery, shares of cruise lines Carnival (NYSE:CCL) and Norwegian Cruise Line Holdings (NASDAQ:NCLH) ended up 7.1% and 9%, respectively. And rental car company Avis Budget Group (NASDAQ:CAR) managed to gain 4.8% after rising nearly 12% earlier in the day.

Three colorful arrows racing straight up on a black background

Image source: Getty Images.

So what

Broadly speaking, these kinds of companies are representative of the health of the travel industry and of discretionary consumer spending, which have both been hit especially hard by the COVID-19 pandemic.

When people are afraid of getting sick on a cruise (or in a rental car on a vacation), that's bad for business. When governments tell people to stay at home for months on end, that's not great news for travel businesses, either. And when the Centers for Disease Control flat-out forbids cruises, that can put a company on the edge of bankruptcy.

And maybe that's why on Wednesday, Morgan Stanley took advantage of some green days on the market to finally throw in the towel and downgrade Norwegian Cruise Line stock to underweight and reinstate its underweight position on Carnival. Just a few hours after that happened, Carnival subsidiary Princess announced that it is once again postponing its resumption of operations in several markets around the world to as late as mid-September, seemingly fulfilling Morgan Stanley's prediction.  

Now what

But what was the good news that apparently told investors today was the right time to buy travel stocks?

Yet another proxy for the travel industry are airline stocks. And today, American Airlines (NASDAQ:AAL) announced that its passenger traffic in May was up 71% from April. The airline also said it is increasing its domestic capacity in June to 25% of the year-ago level (after flying at 20% of capacity in May), and then growing that to 55% in July, in response to a "slow but steady rise in domestic demand."  

Viewed from one angle, that means that in July, American will still be flying only about half as often as it was before the coronavirus. But the airline appears to be forecasting a faster-than-expected recovery. And that bodes well not just for American and airlines as a whole, but also for travel stocks like Carnival, Norwegian Cruise Line, and Avis Budget.