S&P 500 Companies Stock Buybacks to Hit $1-T this Year

S&P 500 Companies Stock Buybacks to Hit $1-T this Year

S&P 500 Companies Stock Buybacks to Hit $1-T this Year

$DIA, $SPY, $QQQ, $RUTX, $VXX

Investors should focus on the $1-T number that will have a Key influence on the market, total buyback authorizations.

Last week investors focused on Apple Inc.’s (NASDAQ:AAPL) value. But another trillion-dollar threshold is coming soon, and is more relevant to this Bull market in US equities.

It is the volume of stock buybacks that corporate America is likely to announce this year. The total for S&P 500 firms will rise 46% from Y2017 to an annual record, according to an increased estimate from the Goldman (NYSE:GS) unit that executes share repurchases for clients.

The new forecast highlights accelerating demand from companies, a sign that any weakness in stocks is likely to be met with unbridled corporate buying.

While August has been a dicey month of the year for stocks in the past 10 yrs, it is also the busiest in terms of buybacks, accounting for 13 percent of the annual total.

Now, with more than 80% of S&P 500 members done with Quarterly financial reporting, most companies can boost discretionary buybacks, concluding a blackout frame that typically restricts share repurchases.

Investors should focus on a different $1-T number that will have a Key influence on the market, total buyback authorizations.

With a year-end forecast of 2,850 for the S&P 500, a level that’s less than 10 points above Friday’s close. The growing alarm around equities, particularly tech stocks, is unwarranted.

At the end of last month, Morgan Stanley a analyst predicted that declines in stocks such as Facebook (NASDAQ:FB) was a precursor to a correction that would be more painful that the February rout.

At the same time, strategists at Bank of America and Credit Suisse sent warnings about the crowding risk in tech stocks, particularly the FAANGs; Facebook, Apple, Amazon, Netflix and Google parent Alphabet.

Goldman’s  analysis came to a different conclusion. Tech is less of a ‘crowded trade” than many investors believe.” Noting the firm’s weekly data on hedge fund clients showed 26% net exposure to tech stocks. That compared with 25% for the broad industry positioning at the end of Q-1, which declined from levels in Ys 2016 and 2017.

Plus, there is still untapped buying power left from tech companies themselves. While the sector has announced 40% more repurchases this year, their actual buybacks are up at just 50% the pace.

Monday, the major US stock market indexes finished at: DJIA+39.60 at 25502.18, NAS Comp+47.66 at 7859.68, S&P 500+10.05 at 2850.14

Volume: Trade on the NYSE came in at 662-M/shares exchanged

  • NAS Comp +13.9% YTD
  • Russell 2000 +9.7% YTD
  • S&P 500 +6.6% YTD
  • DJIA +3.2% YTD

HeffX-LTN’s Major US Stock Market Indexes Technical Analysis

Date Symbol Price Technical Analysis Support Resistance
6 August 2018 QQQ 181.14 Bullish (0.27) 178.22 182.82
6 August 2018 DIA 254.85 Bullish (0.28) 253.72 254.99
6 August 2018 SPY 284.64 Bullish (0.44) 283.65 288.07

Have a terrific week

 

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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