What happened

The stock market was having one of its best single-day rallies of all time on Monday. The Dow Jones Industrial Average opened at an all-time high and was more than 1,100 points higher for the day at 10:50 a.m. EST. The S&P 500 was up by nearly 3%, and most other major averages were well into positive territory.

With an upside move of nearly 8% on the day, the financial sector was one of the market's best performers. And credit card stocks were doing even better. American Express (NYSE:AXP) was up by more than 18% and fellow credit card lender/processor Discover (NYSE:DFS) was 12% higher. Credit card-focused lending institution Capital One (NYSE:COF) was leading the charge among the branch-based U.S. banks, with shares higher by over 13% in Monday's rally.

Woman holding smartphone and credit card.

Image source: Getty Images.

So what

First off, it's important for investors to realize that these have been some of the worst-performing stocks in the COVID-19 pandemic. Even after today's sharp upside move, all three of them are still down for 2020.

AXP Chart

AXP data by YCharts.

The short answer is that the data that was released today about Pfizer's (NYSE:PFE) COVID-19 vaccine candidate is helping to alleviate some of the investor concerns that have caused these stocks to be so beaten down this year.

Specifically, when consumers run into financial difficulties (such as unemployment), they may have trouble paying their bills. This has the potential to cause a spike in loan delinquencies and eventual losses for banks, but the credit card lending industry tends to feel the pain worse than most. Think of it this way: If you were having trouble paying all of your bills, you'd probably make sure your mortgage or rent, your car loan, and other essentials were paid before your credit card bills. In fact, it's not uncommon in tough times for credit card lenders to see default rates in the 10% or more range.

Now what

A COVID-19 vaccine -- especially one that as effective and safe as Pfizer's appears to be -- could help the U.S. economy return to normalcy. This could in turn help bring the unemployment rate back toward pre-pandemic levels and could dramatically reduce the probability that we'll see widespread loan default in the industry for an extended period of time. Investors in these credit card lenders are breathing a sigh of relief today, and that's why we're seeing their share prices spiking higher.

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.