The Dow surged on Wednesday, but a sharp decline in corporate stock buybacks threatens to force the market into a corner. | Source: AP Photo / Richard Drew
Despite the rally, a sharp drop in share repurchases suggests that the bull market may not have much room to grow. Investors may be surprised just how much stock buybacks have contributed to Wall Street’s gains in the last five years.
Dow Spikes; S&P 500, Nasdaq Follow
All of Wall Street’s major indexes reported firm gains Wednesday, mirroring a strong pre-market for Dow futures. The Dow Jones Industrial Average gained 229.44 points, or 0.88%, to 26,191.88.
The broad S&P 500 Index of large-cap stocks advanced 0.76% to 2,922.7.
Surging technology shares propelled the Nasdaq Composite Index sharply higher. The tech-laden benchmark rose 0.81% to 8,013.3.
Share Repurchases Hit 18-Month Low
Companies in the S&P 500 are buying back their shares at the slowest rate in one-and-a-half years, raising fresh alarm over the future of the bull market.
The Wall Street Journal reported Wednesday that buybacks totaled $166 billion in the second quarter, down from $205.8 billion in the first quarter and $190.6 billion a year ago. Repurchases peaked in the fourth quarter of 2018 when they reached $223 billion.