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Month: June 2017

S&P 500 companies slash share buybacks despite record cash levels

S&P 500 companies slash share buybacks despite record cash levels

U.S. stocks rose on Monday, with both the Dow and the S&P 500 ending at new records as technology shares rebounded from a recent bout of sharp weakness to lead the market higher.

The Dow Jones Industrial Average DJIA, -0.27% rose 144.71 points, or 0.7%, to 21,528.99, ending at its highs of the day, which represented both an intraday and a closing record. With the day’s move, the blue-chip average is up 8.9% so far this year.

The S&P 500 SPX, -0.06% gained 20.31 points to 2,453.46, a gain of 0.8%. The large-cap index, up 9.6% in the year to date, hit its own intraday record of 2,453.82 on Monday finished near that high.

The Nasdaq Composite Index COMP, +0.74% rose 87.25 points to 6,239.01, a gain of 1.4% that represented its biggest one-day point and percentage move since Nov. 7. The outsize move in the index was largely due to gains in tech, as the index is heavily weighted toward the sector. The tech benchmark is just about 80 points shy of its June 8 closing high.

Among the most notable tech gainers on Monday, Apple Inc. AAPL, +0.59% rose 2.9% in its biggest one-daDespite strong earnings and record levels of cash on balance sheets, large U.S. companies are spending less money on share repurchases, according to S&P Dow Jones Indices.

There were hopes that the slowdown in buybacks that began last year would pick up with the prospect of a tax overhaul in 2017.

However, it appears that a pickup in share repurchases by large U.S. corporations hasn’t materialized, possibly because executives lost faith in the prospect for significant tax measures being pushed through Congress in 2017.

Companies in the S&P 500 SPX, -0.06% spent $133.1 billion repurchasing their own shares during the first quarter of 2017, according to S&P Dow Jones Indices.

That is a 1.6% decrease from the $135.3 billion spent in the fourth quarter of 2016 and a 17.5% decline from the $161.4 billion spent in the same quarter of last year.

For the 12-month period ending March 2017, S&P 500 companies spent $508.1 billion on buybacks, down 13.8% from $589.4 billion for the prior 12-month period, which was an all-time high.

In previous years, stock buybacks reduced total share count, actively supporting earnings per share. In 2015, the S&P 500 EPS was flat, but would have been negative if it weren’t for buybacks reducing share count

Read: Wall Street sours on buyback ETFs as stock repurchases wane

The number of companies reducing their share count has been steadily declining, however.

Year-over-year share count reductions of at least 4% declined to 71 issues for the first quarter of 2017, compared with 93 for fourth quarter of 2016 and 139 for the first quarter of 2016, said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, in a note.

Silverblatt said the slowdown in share-count reduction will cut into earning-per-share growth.

“Companies may need to make money the old fashion way—earn it,” Silverblatt said.

Financials stepped up their share repurchases in the first quarter, increasing expenditures by 10.2%, to $29.5 billion, the most of any sector, and accounted for 22.2% of all buybacks.

For the 12-month period ending March 2017, shareholder return (both dividends and buybacks) totaled $909.6 billion, a 6.7% decline from the record $975.0 billion for the 12-month period ending March 2016.

Judging by the record levels of cash, a decline in share repurchases is not due to cash constraints. Excluding financials, transportation and utilities, S&P 500 available cash and equivalent now stands at $1.496 trillion, surpassing the previous record of $1.487 trillion, set in the third quarter of 2016. The current cash level is 1.7 times greater than expected 2017 operating income.

According to Silverblatt, corporations continue to hoard cash, which is doing nothing but attracting outside attention.

“Corporations continue to have enough money to do almost anything—and choosing not to,” Silverblatt said.

y advance since February, while Facebook Inc. FB, +1.09% was up 1.5%. Among other major internet names, Amazon.com Inc. AMZN, +0.97% added 0.8%. The tech sector overall XLK, +0.56% rose 1.5% in its biggest one-day rise since December.

“Tech got beat up unfavorably over the past week or two, but as the group’s earnings remain strong, we expect buyers are coming in to take advantage of the depressed prices,” said Peter Lewis, a managing partner at Murphy Capital Management. “Tech valuations are probably nearly the high end of the band, but if earnings and merger activity keep going, that could bode well for the sector.”

nvestors are likely to keep tech stocks in focus this week, amid concerns the sector could start to drag down the broader market, given the Federal Reserve has indicated it will tighten policy and economic data have failed to inspire. That major indexes are trading near records at a time when data have painted a mixed picture of the economy.

“We are deeply concerned about the market’s valuation,” said Phil Davis, chief executive officer at PSW Investments, who said he was viewing the 5,600 on the Nasdaq as a key level, one that is about 2.3% below its Friday closing price. “If we fail to hold 5,600, then you will begin to see panic setting in as fund managers are forced to consider the reality of their overvalued holdings.”

Moves in tech also come as some titans of the industry, including Amazon’s CEO Jeff Bezos, Apple’s Tim Cook and Microsoft Corp.’s MSFT, +0.51% CEO Satya Nadella, met with President Donald Trump at the White House to discuss updating federal computer systems and preventing cyberattacks, among other tech matters.

Stocks to watch: Shares of Boeing Co. BA, +0.42% rose 1.3% after the aircraft maker said more than 10 customers have committed to buying its 737 Max 10 airplanes. It made the announcement at the 2017 Paris Air Show on Monday. Among the orders, General Electric Co.’s GE, -1.24% plane-leasing unit GECAS, signed an order for 20 of the planes.

 

Dow, S&P 500 end at records as tech shares rebound

Dow, S&P 500 end at records as tech shares rebound

U.S. stocks rose on Monday, with both the Dow and the S&P 500 ending at new records as technology shares rebounded from a recent bout of sharp weakness to lead the market higher.

The Dow Jones Industrial Average DJIA, -0.27% rose 144.71 points, or 0.7%, to 21,528.99, ending at its highs of the day, which represented both an intraday and a closing record. With the day’s move, the blue-chip average is up 8.9% so far this year.

The S&P 500 SPX, -0.06% gained 20.31 points to 2,453.46, a gain of 0.8%. The large-cap index, up 9.6% in the year to date, hit its own intraday record of 2,453.82 on Monday finished near that high.

The Nasdaq Composite Index COMP, +0.74% rose 87.25 points to 6,239.01, a gain of 1.4% that represented its biggest one-day point and percentage move since Nov. 7. The outsize move in the index was largely due to gains in tech, as the index is heavily weighted toward the sector. The tech benchmark is just about 80 points shy of its June 8 closing high.

Among the most notable tech gainers on Monday, Apple Inc. AAPL, +0.59% rose 2.9% in its biggest one-day advance since February, while Facebook Inc. FB, +1.09% was up 1.5%. Among other major internet names, Amazon.com Inc. AMZN, +0.97% added 0.8%. The tech sector overall XLK, +0.56% rose 1.5% in its biggest one-day rise since December.

“Tech got beat up unfavorably over the past week or two, but as the group’s earnings remain strong, we expect buyers are coming in to take advantage of the depressed prices,” said Peter Lewis, a managing partner at Murphy Capital Management. “Tech valuations are probably nearly the high end of the band, but if earnings and merger activity keep going, that could bode well for the sector.”

nvestors are likely to keep tech stocks in focus this week, amid concerns the sector could start to drag down the broader market, given the Federal Reserve has indicated it will tighten policy and economic data have failed to inspire. That major indexes are trading near records at a time when data have painted a mixed picture of the economy.

“We are deeply concerned about the market’s valuation,” said Phil Davis, chief executive officer at PSW Investments, who said he was viewing the 5,600 on the Nasdaq as a key level, one that is about 2.3% below its Friday closing price. “If we fail to hold 5,600, then you will begin to see panic setting in as fund managers are forced to consider the reality of their overvalued holdings.”

Moves in tech also come as some titans of the industry, including Amazon’s CEO Jeff Bezos, Apple’s Tim Cook and Microsoft Corp.’s MSFT, +0.51% CEO Satya Nadella, met with President Donald Trump at the White House to discuss updating federal computer systems and preventing cyberattacks, among other tech matters.

Stocks to watch: Shares of Boeing Co. BA, +0.42% rose 1.3% after the aircraft maker said more than 10 customers have committed to buying its 737 Max 10 airplanes. It made the announcement at the 2017 Paris Air Show on Monday. Among the orders, General Electric Co.’s GE, -1.24% plane-leasing unit GECAS, signed an order for 20 of the planes.

 

Dow pivots into the red after touching record following Comey testimony

Dow pivots into the red after touching record following Comey testimony

The Dow Jones Industrial Average on Thursday set a fresh all-time high in intraday trade, but turned lower, on the heels of testimony from former FBI Director James Comey. The broader stock market had been trading modestly higher as Comey ended testimony in front of the Senate Intelligence Committee that some believe provided no surprises that might alter President Donald Trump’s pro-growth policy agenda. The Dow DJIA, +0.04% was trading down 0.1% at 21,144 in recent trade, retreating from its intraday of 21,265,69. Comey offered detailed testimony about his interactions with Trump before his firing on May 9, amid the Federal Bureau of Investigation’s probe into Russia’s connection to members of the president’s 2016 election campaign. The S&P 500 index SPX, +0.03% was down 0.2% at 2,428, while the Nasdaq Composite Index COMP, +0.39% which touched its own intraday record earlier in the session, was flat at 6,299. The Dow had been buoyed by financial shares, with Goldman Sachs Group Inc.’s shares GS, +1.38% Bank shares got a lift as Treasury yields rose slightly, with the 10-year benchmark Treasury yield [BX: TMUBMUSD10Y] rose 1.7 basis point to 2.19%. Banks benefit when rates rise because it helps to increase their margins, or what they pay out on short-term deposits and garner for lending long-term.

Nasdaq closes at record as stocks edge up following Comey testimony

Nasdaq closes at record as stocks edge up following Comey testimony

U.S. stocks notched meager gains Thursday, but the Nasdaq closed at a record after former FBI Director James Comey’s appearance in front of the U.S. Senate Intelligence Committee concluded without any significant revelations.

The Dow Jones Industrial Average DJIA, +0.04% rose 8.84 points to finish, less than 0.1%, at 21,182.53 after hitting an intraday record of 21,265.69 on strong gains in Caterpillar Inc. CAT, +1.45% and Goldman Sachs Group Inc. GS, +1.38%

The S&P 500 index SPX, +0.03% added 0.65 point to close at 2,433.79. Financials rallied 1.1% while utilities were the biggest decliners.

The Nasdaq Composite Index COMP, +0.39% gained 24.38 points, or 0.4%, to end at 6,321.76 after setting an intraday record of 6,324.06.

“It is evident from the market’s reaction that the testimony is more hype than substance, equivalent to preparing for a major storm that may not occur,” said Kent Engelke, chief economic strategist at Capitol Securities Management Inc.

Comey’s testimony is part of a litany of potentially market-moving events playing out over the next 24 hours, including an earlier decision by the European Central Bank to keep its monetary policy unchanged and a U.K. snap election.

However, Wall Street investors have signaled that events don’t appear to threaten the stock market’s extended push into record territory, which has been driven by President Donald Trump’s promises of tax cuts, infrastructure spending and deregulation

Comey’s statement, released Wednesday, suggested he was worried Trump had sought to secure his “loyalty” and wanted him to help “lift the cloud” from the investigation into possible Russian interference in the U.S. election was casting. Comey also confirmed the president’s assertion that the director had repeatedly assured Trump that the Federal Bureau of Investigation hadn’t opened an investigation into him. He reiterated those assertions during his testimony in front of the Senate panel.

Engelke, meanwhile, believes that the House passage of legislation to roll back the Dodd-Frank financial regulatory bill is likely to accelerate circulation of capital in the markets and boost economic activity.

Phil Orlando, chief equity strategist at Federated Investors, said absent any surprises, recent events suggests that the stock market should drift higher.

“Ultimately, stock markets are going to reflect earnings,” he said.

Orlando said the U.S. and Europe are showing strong quarterly results that may help to support gains in stocks that some strategists and investors view as overvalued.

Earlier in the day, the ECB, as expected, left interest rates unchanged but said it continued to expect interest rates “to remain at present levels for an extended period of time, and well past the horizon” of its asset-buying program, which is set to run at least through December. In previous statements, the ECB had said it expected rates “to remain at present or lower levels for an extended period of time.”