Standard & Poor’sDow Jones Index (S&P Dow Jones Indices) shows that the size of the treasury stocks of S&P 500 constituent companies is expected to break through $1 trillion for the first time this year. In a volatile market environment, this will bring key support to US stocks this year.
In fact, the pace of corporate authorization to implement treasury shares is accelerating.Goldman Sachs pairS&P 500 IndexThe analysis of constituent stocks and Russell 3000 index constituent companies shows that as of February 17, the total amount of treasury stock authorization has exceeded 220 billion U.S. dollars, a record high for the same period of time. The largest authorized treasury stock plan includes Chevron (CVX-US)’s $75 billion, Facebook’s parent company Meta(META-US) of $40 billion, and Goldman Sachs (GS-US) of $30 billion.
S&P 500 IndexIt closed up 0.31% on Monday (27th), but following three consecutive weeks of blackouts, February is still down more than 2% so far, as recent strong economic data forced investors to readjust their expectations for Fed interest rates. Gains so far have pared back to regarding 3.7 percent.
Buying back treasury stocks is usually decided by the company itself and implemented within a few years. This action is often seen by the outside world as a vote of confidence for the company’s own stocks, and the company’s stock repurchase will not only reduce the number of outstanding shares, but also promote High earnings per share (EPS).
With corporate profit margins squeezed, some investors expect companies to continue buying back shares to keep earnings per share growing.
According to FactSet data,S&P 500 IndexAmong the constituent stocks, 94% of the companies have announced their fourth-quarter financial results, and only regarding 68% of the companies’ performance is better than Wall Street’s expectations, which is worse than usual.
Investors and analysts say it is easier for companies to adjust their share buyback strategies in response to market and economic turmoil than to adjust dividend and capital spending plans, which are difficult to change once they are launched.
Standard & Poor’sDow Jones IndexData show that as of last Saturday (25th), fromS&P 500 IndexAccording to the Q4 financial reports of regarding 90% of constituent companies, the scale of stock repurchases of these companies that have released financial reports fell by regarding 18% from the same period of the previous year to US$189 billion.
For some investors and analysts, the slowdown in share buybacks in Q4 is actually good news. While the 1% federal repurchase tax took effect on Jan. 1 this year, it is clear that corporate buyback spending has not been brought forward as a result, so the tax is unlikely to prevent companies from buying back stock this year, they said.
VerityData’s Silverman said companies aren’t worried regarding the repurchase tax, so there’s been no frontal buybacks.