(Bloomberg) -- Count corporate America as one of the big dip-buyers last week as US stocks fell into their worst correction since October.
As the S&P 500 headed for its fourth straight weekly decline, including a 3% drop on Monday, Goldman Sachs Group Inc.’s unit that executes share buybacks for clients saw record orders, with volume spiking to 2.1 times last year’s daily average.
A buying spree also occurred with Bank of America Corp.’s corporate clients, whose share repurchases picked up speed and stayed above seasonal levels for 22 weeks in a row.
The deluge of buybacks coincided with a market recovery, which saw the S&P 500 recoup more than half its summer losses. Companies’ willingness to scoop up their own shares during market stress underscores how reliable a source of support they can be at a time when angst over economic growth and equity valuations is resurfacing.
With second-quarter reporting season drawing to a close, firms are emerging from a blackout period for buybacks. Judging by announced plans, their demand is set to stay buoyant. That’s good news to investors big and small who took advantage of the pullback to snap up stocks too.
“You’re seeing lots of buyback announcements and that coupled with the actual executions tells me corporate America is still healthy,” Jeff Rubin, president at Birinyi Associates, said by phone, adding 775 firms have announced buyback plans since January, poised for the highest number in at least 11 years.
American firms have declared intentions to buy back $826 billion of their own shares this year, 15% above the planned total at this time last year, data compiled by Birinyi show. Actual buybacks for 2024 will likely exceed $1 trillion, Rubin estimates.
Goldman’s trading desk is less optimistic, predicting $960 billion in total executions for the full year. Still, should firms follow historical patterns where August and September make up roughly 21% of the annual total, that’d equate to daily purchasing power of $4.75 billion in coming weeks.
Spending money on stock has repeatedly drawn criticism from politicians and academics who say the cash would be better used to help boost long-term growth, such as for employee benefits or equipment upgrades. Last year, a law went into effect imposing a 1% tax on buybacks.
But money managers welcome the buying binge. For the first time since at least 2021, investing pros said chief executives should prioritize shareholder returns over capital spending, according to Bank of America’s latest monthly survey.
In that poll, 28% of money managers urged companies to boost returns through share buybacks, dividends or debt-financed takeovers — the most since November 2013. Meanwhile, only 24% wanted business leaders to increase capital expenditures, the lowest proportion since November.
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