Why American Express is trading higher today

Actions of American Express (AXP 3.10%) traded about 4% higher as of 1:30 p.m. ET today, according to data from S&P Global Market Intelligence, as the market tried to recoup some of the losses suffered last week when the broader benchmark S&P 500 it fell 1.7% and suffered its worst week since March 2023. While there was no specific news about the company today, there are a few reasons to explain the move.

Keeping an eye on the economy

As a lending and credit card company, American Express is a cyclical stock that will be affected by trends in the economy. Last week, economic data suggested the economy could deteriorate faster than expected, casting doubt on a soft landing scenario.

The US economy also added fewer jobs than expected in August. Unemployment has held steady, but fears of a weaker labor market will hurt a credit card company that underwrites loans and credits that rely heavily on monthly income.

However, I think the market was probably oversold last week and American Express saw its stock drop about 5.6%. With American Express down significantly last week, it was more likely to participate in the rally today.

In addition, from Citigroup Chief Financial Officer Mark Mason told an industry conference this morning that he still foresees a soft landing scenario as interest rates fall. Citigroup is a major bank and credit card lender, so it’s good for the industry to see a major executive reaffirming the positive sentiment.

Is AmEx stock a buy?

American Express has been a great stock to own for decades and is now the second largest position in the from Berkshire Hathaway massive stock portfolio. Warren Buffett himself called the brand “special”.

Another good thing about the company is that it mostly caters to higher income customers who tend to be more resilient during a recession. American Express also has a large payments business, which gives it good revenue diversity.

The company’s stock currently trades for 19 times forward earnings, so there may be cheaper entry points going forward. However, the company continues to be a great long-term buy and hold stock.