Regular readers know I've tracked one narrative closely throughout 2024... Consumers are nearing a breaking point.

Here's What Credit-Card Companies Are Saying About U.S. Consumers By Vic Lederman, editorial director, Chaikin Analytics Regular readers know I've tracked one narrative closely throughout 2024... Consumers are nearing a breaking point. That statement worries me. But like a lot of topics, the media tends to exaggerate things... As I told Chaikin PowerFeed readers earlier this year, the numbers don't support this narrative. Total consumer debt in the U.S. hasn't changed much over the past 20 years. And when you account for inflation, U.S. household debt is still well below the all-time highs of the late 2000s. Of course, the outlook for consumers is constantly evolving. So I took a close look at the latest earnings from two of America's biggest credit-card companies – Capital One Financial (COF) and American Express (AXP). What I found might surprise you... 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And their earnings reports can give us an early warning sign if trouble is brewing. To keep it simple, I've broken down my findings into three basic takeaways...   1.  U.S. consumers are spending more. Capital One said its cardholder purchases grew 5% year over year. American Express reported a 6% increase. Notably, these growth numbers are stronger than the latest economic data. Last week, the U.S. Department of Commerce said that its September data shows that consumer spending rose 3.7% year over year. That's the highest growth rate since early 2023.   2.  Credit-card balances are rising. At Capital One, credit-card loan balances rose 6% versus a year ago. And American Express said that outstanding loans to its cardholders jumped 14%. These rising balances could be a sign of consumer stress. But American Express caters to higher-income folks. So the big increase is more likely a sign that folks are more comfortable carrying some short-term debt. It's also worth noting that those higher balances will translate to higher interest income for both companies.   3.  Delinquencies and defaults are rising very slowly. If you're looking for signs of trouble, there are two key metrics to watch – 30-day delinquency rates and net charge-off rates. The first one tells us whether folks are paying their bills on time. And the second one is the percentage of loans the company has written off as a loss. Capital One's delinquency rate was roughly 4.5% last quarter. That's up slightly from 4.3% a year ago. Those numbers are above pre-pandemic levels around 4%, but not by much.  Meanwhile, American Express' latest numbers showed a 1.3% delinquency rate. That's unchanged versus a year ago. Similarly, Capital One saw a slightly higher charge-off rate of 5.6% compared with last year's rate of 4.4%. But that number was down versus the previous quarter. And the company reduced its provision for credit losses. In other words, Capital One is seeing less defaults than it expected a few months ago. American Express' charge-off rate was 1.9%. That's barely above the 1.8% rate from the third quarter of 2023. When you add everything up, there aren't any red flags... The worst number is Capital One's 5.6% charge-off rate. But that isn't a big problem considering the company is collecting 20%-plus interest rates on the rest of its outstanding loans. It's also worth noting that both companies' stocks hit fresh highs in recent weeks. Of course, these numbers don't mean that every consumer is doing great. Based on Capital One's results, roughly 5% of its customers are struggling. In fact, Capital One's CEO noted in the earnings call that folks at the lower end of its customer base – in terms of both income and credit score – are holding up well. The company is seeing more pressure on folks with "prime" credit scores. Again, I don't want to dismiss the fact that some folks are struggling... Inflation has put pressure on everyone's personal finances. And when you add a surprise shock like getting laid off or experiencing a major health issue, it can be overwhelming. Credit-card companies have millions of customers. No matter what, some of those customers are going to run into trouble paying their bills. We're seeing that percentage increase a bit lately. But when you look at the long-term picture, we're back to normal levels – in terms of defaults on credit-card bills. Take a look... Folks, the media is always full of scary headlines – whether they're about the strength of the U.S. consumer or something else. If you're like me, you can't help but click on some of them. But in this case, they're nonsense. I'll admit it – I'm surprised at how well U.S. consumers are holding up. The latest numbers are downright impressive. Keep that in mind the next time you click on a scary headline. Good investing, Vic Lederman Market View Major Indexes and Notable Sectors     # Hld:     Bullish     Neutral     Bearish Dow 30 -0.56% 7 19 4 S&P 500 -0.21% 112 306 75 Nasdaq -0.29% 22 68 10 Small Caps +0.52% 483 1042 393 Bonds +1.55% Energy +1.78% 0 14 7 — According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks remain somewhat Bullish. Major indexes are mixed. *  *  *  * Sector Tracker Sector movement over the last 5 days Communication +0.72% Energy +0.45% Discretionary -0.91% Staples -1.03% Materials -1.26% Health Care -1.35% Industrials -1.43% Financial -1.97% Real Estate -2.24% Information Technology -2.81% Utilities -4.7% *  *  *  * Industry Focus Dow Jones REIT Services 14 54 32 Over the past 6 months, the Dow Jones REIT subsector (RWR) has outperformed the S&P 500 by +3.03%. However, its Power Bar ratio, which measures future potential, is Weak, with more Bearish than Bullish stocks. It is currently ranked #16 of 21 subsectors and has moved down 3 slots over the past week. Indicative Stocks AIV Apartment Investment SVC Service Properties T APLE Apple Hospitality RE *  *  *  * Top Movers Gainers MOS +5.36% ENPH +4.69% SHW +4.59% EBAY +3.65% FSLR +3.58% Losers CEG -12.46% PEG -6.23% UAL -3.99% AMTM -3.77% CMG -3.77% *  *  *  * Earnings Report Reporting Today Rating Before Open After Close ES, JKHY ADM, BLDR, BR, CMI, EMR, HSIC, IT, MPC, SPG, TRGP AIZ, DVN, IFF, SMCI DD, EXPD, YUM CSX, MCHP No earnings reporting today. Earnings Surprises AVB AvalonBay Communities, Inc. Q3 $2.47 Beat by $1.00 AZPN Aspen Technology, Inc. Q1 $0.85 Missed by $-0.68 ILMN Illumina, Inc. Q3 $1.14 Beat by $0.26 FOXA Fox Corporation Q1 $1.45 Beat by $0.33 ADM Archer-Daniels-Midland Company Q3 $1.03 Missed by $-0.21 *  *  *  * You have received this e-mail as part of your subscription to PowerFeed. If you no longer want to receive e-mails from PowerFeed, click here. 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