American Express (AXP 0.46%) is leading the Dow Jones Industrial Average (^DJI 0.15%) up following multiple positive reports on the housing market and better-than-expected consumer confidence numbers. As of 1:15 p.m. EDT the Dow was up 54 points to 16,660. The S&P 500 (^GSPC 0.25%) was up eight points to 1,909 after hitting an intraday record of 1911.6 earlier in the day.

Four U.S. economic releases are pushing stock markets higher today.





Durable-goods orders




Case-Shiller U.S. National Home Price Index

Q1 2014



FHFA home price index




Consumer confidence index




While both home price reports rose slightly more than expected, the surprise today was durable-goods orders, which grew 0.8% in April. Economists had expected durable-goods orders would drop in April after the pent-up demand from the harsh winter led to a big jump in March. However, a large rise in orders for defense equipment led durable-goods orders even higher. The positive economic reports are leading the stock market higher today, with financials leading the way.


Today's Dow leader is American Express, up 2.6%. American Express does better when its customers spend more money. As housing prices rise, there is a wealth effect that makes people feel wealthier and thus spend more money. Creating a wealth effect has been one of the goals of the Federal Reserve Open Market Committee's long-term asset purchases, as well as its zero-interest-rate policy. While housing prices have indeed risen, spending remains below the levels the Fed would like to see. The rising consumer confidence index also is a reason to believe that spending will continue to rise.

The big reason American Express is up today is that analysts from Morgan Stanley reiterated their "outperform" rating in a note to clients, as well as their $100 price target, as the firm sees American Express having numerous ways to grow. American Express CEO Ken Chenault agrees with them, saying there is a tremendous opportunity in the payments industry around the world: "We looked at where spending takes place. Outside of credit cards and charge cards, there's $25 trillion out there." This owes to the fact that 90% of the transactions in emerging markets are made using cash or checks.

As per-capita wealth and infrastructure expand in these markets, you can expect the payment space to grow, providing a runway for American Express, Visa, and MasterCard.