Stock buybacks are under renewed scrutiny. When economic times are tough and corporate revenues are falling, it’s hard to justify spending money on what amounts to a shareholder bonus.
In mid-March, major U.S. banks said they would give up buybacks through the second quarter. The Financial Services Forum, which represents the top eight, described it as in the best interests of bank clients and the country, “consistent with our collective objective to use our significant capital and liquidity to provide maximum support to individuals, small businesses, and the broader economy…”
Other large companies followed.
Chipotle Mexican Grill,
United Parcel Services,
all talked of suspending buybacks.
But not Big Tech. In the first quarter,
repurchased $8.5 billion in stock, a quarterly record. “We believe a share-repurchase program for us, appropriately sized, is responsible in the current environment based on our capital allocation framework and our cash balance,” said CFO Ruth Porat on this past week’s earnings call.
have also binged on buybacks. Microsoft returned $9.9 billion to shareholders in the latest quarter in buybacks and dividends—up 33% from a year ago—and separately disclosed that $6 billion of that was in repurchases. Facebook bought back $1.2 billion during the quarter. And
tech’s biggest share repurchaser, said on Thursday that it would add another $50 billion to its buyback program.
Going to Extremes
Stocks rose on stimulus, staggered as oil fell again, then bounced back. Small-caps rallied as volatility fell, and good news on Covid-19 vaccines and therapeutics sent indexes up. Earnings season continued with
reporting, shadowed by dire economic data: tanking first-quarter growth, 3.8 million more jobless claims, and March consumer spending off 7.5%. Friday was ugly, with stocks giving back gains from earlier in the week. On the week, the Dow industrials fell 0.2%, to 23,723.69; the S&P 500 slipped 0.2%, to 2830.71; and the Nasdaq Composite lost 0.3%, to 8604.95.
Remdesivir Into the Breach
The president announced that the Food and Drug Administration had granted Gilead Science’s antiviral remdesivir emergency use authorization. The intravenous drug has shortened recovery times for some Covid-19 patients.
The U.S. passed a million Covid-19 cases as the death toll topped 60,000. Texas, with relatively few apparent infections but little testing, joined other states opening their economies. Even hard-hit New York and New Jersey began to build testing and contact-tracing systems, and to plan reopenings. President Donald Trump retreated from briefings after speculating on the therapeutic benefits of disinfectants and light—he later said he was being “sarcastic”—then returned to promote testing. The administration said it would provide tests to screen 2% of Americans a month, which health experts criticized as too few. Randomized tests showed that 21% of New York City residents had antibodies to the virus.
The Next Curve
Treasury Secretary Steven Mnuchin forecast a fall in second-quarter growth and a bounceback in July, days before first-quarter growth was reported to have shrunk by an annualized 4.8%.
warned that air travel wouldn’t hit prepandemic levels for two to three years,
forecast rising credit losses, and car makers and the auto union sparred over reopening factories. Trump used the Defense Production Act to keep infection-racked meatpacking plants open. And the website for the second round of small-business loans collapsed, while the Treasury attempted to recoup funds from big companies that got handouts in the first round.
Powell Drops His Reserve
The Federal Reserve policy-making committee left interest rates unchanged at roughly zero. In his press conference, Fed Chairman Jerome Powell urged Congress to put deficit fears aside.
Kim: The Mystery Deepens
North Korean leader Kim Jong Un’s disappearance has stirred conspiracy theories, particularly online, about his health. Asked whether Kim was dead, Trump on Monday appeared to suggest he was alive, saying “I wish him well,” but adding, “Nobody knows where he is.” On Saturday, Korea time, state media said he had appeared at a fertilizer factory.
Annals of Deal-Making
Boeing dropped plans to buy Embraer’s jetliner business for $4 billion, then raised $25 billion in bonds…
Diamond Offshore Drilling,
filed for Chapter 11…J. Crew is reportedly readying a filing, perhaps by this weekend.
Write to Alex Eule at firstname.lastname@example.org