Courtesy of Blain.
Indexes had a solid day as a morning lull was followed by buyers stepping in. The S&P 500 gained 0.52% and the NASDAQ 0.43%.
The stock buyback tsunami continues unabated – probably the untold story of this rally. Cheap debt financing has fueled a massive buyback spree which has taken a lot of supply of stock off the market. And since earnings are per share – when the per share amount goes down we get a nice boost.
In 2014, while the S&P 500 rose to record highs, component companies spent $553 billion on share repurchases, according to S&P Dow Jones Indices data – a 16.3 percent increase from the previous year and four times as much as they did in 2009. The buyback spree has accelerated this year. Pending and completed buybacks at all U.S.-based traded companies in the first quarter rose to $179.7 billion compared with $124.2 billion in the first quarter of 2014, up almost 45 percent.
Buybacks may lift earnings per share of companies in the Standard & Poor’s 500 index by between 1.5 and 2 percentage points this year, according to estimates from Voya Investment Management in New York. With earnings estimates now calling for 1.5 percent growth for all of 2015, buybacks could make the difference between positive and negative growth in S&P 500 EPS.
The NASDAQ added nicely to yesterday’s breakout out of the wedge pattern we charted. Still work to do on the S&P 500 as it has been a laggard – getting over 2120 is our new key.
If the market can stay relatively stable next week we might see this pattern of intermediate term positive readings on the NYSE McClellan Oscillator that lead to nice rallies continue.
Speaking of buybacks – General Electric (GE) announced a major restructuring of GE Capital, including the sale of most of the unit’s assets, and will institute a $50 billion stock buyback program with proceeds from the move. The industrial giant’s stock price reached its highest level since Sept. 2008 as almost 352 million shares traded, the largest daily volume since March 2009.
Citi upgraded Netflix (NFLX) to “buy” from “neutral,” saying it doesn’t share competition concerns that are currently reflected in the stock’s price.
Some consumer discretionary stocks have been interesting laggards of late – we saw some rotation into those names today. An example, Chipotle Mexican Grill (CMG).
LinkedIn (LNKD) also had a reversal today so we might be seeing people return to the ‘momentum’ type names today.
The USDA has a prediction of the 30 largest economies by 2030.
The U.S. will just barely remain the global leader, with $24.8 trillion in annual output. The gray bar represents the $16.8 trillion gross domestic product projected for 2015, and the green bar shows how much bigger the economy is expected to be 15 years from now. The country, worth 25 percent of the world economy in 2006 and 23 percent in 2015, will see its share decline to 20 percent. China’s GDP will grow to more than twice its size today, helping the Asian powerhouse to almost entirely close its gap with the U.S. India, ranked eighth for 2015, will climb past Brazil, the United Kingdom, France, Germany and Japan to take third place in the world ranking.
Have a good weekend and we’ll see you back here next week for the first real week of earnings season.
