US stocks log record highs as investors look to Big Tech to sustain earnings growth

NYSE Traders
  • Dow industrials push further beyond 35,000 in Monday’s record-setting highs for stocks.
  • Tesla and Facebook earnings are among those on deck for this week’s earnings wave.
  • The Federal Reserve will start its two-day meeting on Tuesday.
  • See more stories on Insider’s business page.

Stocks finished at record highs Monday as investors set their sights on earnings reports from major technology companies and appeared to set aside concerns about economic recovery in the face of rising coronavirus cases.

The Dow Jones Industrial Average pushed further above 35,000 after crossing that threshold for the first time on Friday. Stocks overcame losses earlier in Monday’s session to build on record highs notched Friday, capping a rebound from a rout last week. Stocks have seen points of weakness in recent sessions on worries about increasing COVID-19 cases around the world as the highly transmissible Delta variant spreads.

Investors will start to plow through this week’s earnings reports, with more than one-third of S&P 500 companies set to release results. Tesla’s report is due after the bell Monday, followed by Alphabet, Apple, Microsoft on Tuesday, and Facebook on Wednesday.

Here’s where US indexes stood at 4:00 p.m. on Monday:

S&P 500 companies are on track for their best earnings growth since 2009, with profit expected to increase 78.1% year-on-year in the second quarter.

“What we’re looking for is what are companies doing with these strong earnings, what are they doing with their cash flow,” Tom Hainlin, national investment strategist at U.S. Bank Wealth Management, told Insider on Monday.

“If they’re optimistic about the future, we’re looking for them to invest that cash flow … new businesses, new initiatives, new factories,” he said. “We’re looking for what are companies doing with these proceeds to give us some insight from the corporate side into where we think the economy is going in the second half and into 2022,” he said.

The Fed’s two-day meeting that begins Tuesday and ends on Wednesday will likely produce commentary about its outlook on domestic and global economic recovery and investors will gauge when the Fed may begin tapering asset purchases or start raising interest rates.

Around the markets, billionaire investor Jeremy Grantham’s firm GMO says stocks are overvalued by every metric.

Warren Buffett’s Berkshire Hathaway is facing a legal battle with Volkswagen after rejecting a settlement deal with the German auto giant related to its emissions scandal.

Gold fell 1.3%, to $1,798.06 per ounce. Long-dated US Treasury yields slipped, with the 10-year yield at 1.27%.

Oil prices turned slightly higher. West Texas Intermediate crude was fractionally higher at $72.09 per barrel.

Bitcoin jumped 13%, to $38,955.23. The digital currency rose above $38,000 for the first time in about six weeks, partially on a report that Amazon is considering accepting bitcoin payments.

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Dow rises 285 points for 2nd straight daily gain as focus shifts away from growth worries to earnings season

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Stocks are on the mend following pullbacks from record highs.

  • The Dow Jones Industrial Average climbed 285 points to extend a relief rally on Wednesday.
  • The S&P 500 also rose and the Nasdaq Composite pushed through early weakness.
  • Johnson & Johnson was among the Dow stocks that raised its annual earnings guidance.
  • See more stories on Insider’s business page.

US stocks closed higher Wednesday, led by blue-chips as many corporate behemoths upgraded financial guidance, though questions linger about global economic recovery as COVID-19 infections rise.

The Nasdaq Composite overcame earlier weakness while the Dow Jones Industrial Average soared 285 points to advance for a second straight day of gains. The Dow was helped by shares of Coca-Cola, Johnson & Johnson and Verizon which rose after each company raised their financial guidance and posted quarterly results that beat analyst expectations.

Stocks extended Tuesday’s rebound from a rout in the previous session that was triggered by reports about mounting coronavirus cases worldwide. Retail investors buying the dip in shares on Monday purchased a record $2.2 billion of equities.

Wednesday’s “trade is a natural reaction to such a violent move on Friday and on Monday… but I’d steer clear of drawing any conclusions that say in today’s trading, “All is well,” Keith Buchanan, senior portfolio manager at Globalt Investments, told Insider. “We still have to see a lot more from a data perspective to reassure this market that the reopening and progress towards the new normal of economic conditions and consumer behavior are still on track.”

Here’s where US indexes stood at 4:00 p.m. on Wednesday:

Investors have been skittish about COVID-related developments, including a stall in vaccination rates in the US while the highly transmissible Delta variant of the coronavirus is responsible for an estimated 83% of all new cases, according to the Centers for Disease Control and Prevention.

Also key for the direction of markets is the outlook on inflation given that consumer and wholesales prices have shot up to multi-year highs.

“It’s paramount that investors have a clear understanding of what corporations are dealing with from a supply-shortage standpoint and how that’s developing, what they’re having to pay in order to get their products out to market,” and other cost factors including labor and whether they can pass price increases to their customers, said Buchanan.

Around the markets, Cathie Wood has added to her bitcoin exposure with another purchase of shares in the Grayscale Bitcoin Trust after the cryptocurrency fell below $30,000 on Tuesday. Meanwhile, legendary investor Jeremy Grantham said the stock and cryptocurrency markets are in bubbles worse than in 2000.

Ulta will open mini-shops at 100 Target stores next month, the biggest cosmetics retailer in the US said Wednesday.

JPMorgan Chase handed Jamie Dimon a stock award potentially worth millions if he stays CEO for at least five more years.

Gold slipped by 0.3%, to $1,804.30 per ounce. Long-dated US Treasury yields edged up, with the 10-year yield at 1.28%.

Oil prices jumped, pushing past weekly US data showing an unexpected climb of 2.1 million barrels in crude supplies. West Texas Intermediate crude rose 4.3%, to $70.31 per barrel. Brent crude, oil’s international benchmark, gained 4.2%, to $72.25 per barrel.

Bitcoin surged 6.6%, to $31,763.61.

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US stocks rise as investors weigh growth concerns against strong corporate earnings

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Traders and investors braced for the jobs data on Friday.

  • Stocks were up Wednesday following a rebound rally in the previous session.
  • Cola-Cola and Verizon aided a rise in the Dow Jones Industrial Average.
  • Bitcoin and oil prices advanced.
  • See more stories on Insider’s business page.

US stocks edged higher Wednesday, with blue-chip stocks advancing on the back of earnings reports that outstripped Wall Street’s targets, while investors confronted questions about global economic recovery as COVID-19 infections rise.

The Nasdaq Composite, home to large-cap tech stocks, slipped while the Dow Jones Industrial Average gained ground. Stocks on Tuesday staged a comeback after a rout in the previous session that was triggered by reports about mounting coronavirus cases worldwide.

Here’s where US indexes stood at 9:30 a.m. on Wednesday:

The Dow on Wednesday found strength from shares of Coca-Cola, Johnson & Johnson and Verizon after each company posted quarterly results that beat analyst expectations and raised guidance.

COVID cases have been increasing on the spread of the Delta strain of the virus and could fuel worries about stagflation, or the combination of slowing economic growth and inflation.

“If the virus begins to spread rapidly again, that would curtail economic growth and prolong the inflationary supply chain disruptions that have affected so many industries including semiconductors and housing,” said Nancy Davis, portfolio manager of the Quadratic Interest Rate Volatility and Inflation Hedge Exchange-Traded Fund, or IVOL, in a note.

“Stagflation is a 60/40 portfolio’s worst nightmare, as stocks and bonds tend to fall together during stagflationary environments. Lower economic growth punishes stocks and inflation robs bond investors of their returns,” she said.

Around the markets, Cathie Wood has added to her bitcoin exposure with another purchase of shares in the Grayscale Bitcoin Trust after the cryptocurrency fell below $30,000 on Tuesday.

Ulta will open mini shops at 100 Target stores next month, the biggest cosmetics retailer in the US said Wednesday.

Gold slipped by 0.5%, to $1,801.17 per ounce. Long-dated US Treasury yields edged up, with the 10-year yield at 1.23%.

Oil prices gained ground, with West Texas Intermediate crude up 1.5% at $68.41 per barrel. Brent crude, oil’s international benchmark, gained 1.2% to $74.59 per barrel.

Bitcoin jumped 6%, to $31,586.92.

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All major US stock indexes close at record highs ahead of a flood of corporate earnings

Traders work on the floor of the New York Stock Exchange (NYSE)
  • Wall Street’s key stock indexes ended at record highs on Monday.
  • Stocks advanced ahead of the second-quarter earnings season which starts on Tuesday.
  • Disney and Goldman Sachs shares were winners on the Dow Jones Industrial Average.
  • See more stories on Insider’s business page.

US stocks finished at record highs on Monday, before the start of a new round of earnings reports that should show profit growth for Corporate America.

All three of Wall Street’s benchmark indexes notched new closing highs, with the Dow industrials and the S&P 500 overcoming losses earlier in the day. Among the Dow’s winners, Disney rose after saying its Disney Plus streaming service pulled in $60 million from this weekend’s release of Marvel Studios’ “Black Widow” movie.

Here’s where US indexes stood at 4:30 p.m. on Monday:

Goldman Sachs and JP Morgan Chase advanced ahead of the release of their financial results early Tuesday in what’s considered the kickoff to the second-quarter earnings season. S&P 500 companies are expected, on average, profit growth of 64%, led by the energy and industrial sectors, according to FactSet.

“With expectations high (again), it won’t be easy for companies to handily clear the bar like they did the past several quarters. We also recognize that stock valuations are elevated, so disappointments will likely be punished. Stocks need strong earnings to come through to justify those valuations, and we think we’ll get them,” said strategists at LPL Financial in a Monday note.

Around the markets, Virgin Galactic shares turned sharply lower after the company said it could sell up to $500 million worth of stock following a successful space test flight with founder Richard Branson on board.

Markets veteran Mohamed El-Erian said stocks are vulnerable to falls despite the recent drop in bond yields and could be rocked when the US Federal Reserve starts to unwind its support.

Gold rose 0.9% to $1,805.68 per ounce. Long-dated US Treasury yields rose, with the 10-year yield at 1.363%.

Oil prices were mixed. West Texas Intermediate crude declined 0.6%, to $74.12. Brent crude, oil’s international benchmark, picked up 0.1%, to $75.23 per barrel .

Bitcoin dropped 3.9%, to $32,910.95.

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Stocks recovered too quickly from the pandemic and could face a correction in the next year, a survey from the CFA Institute says

  • 45% of survey respondents told the CFA Institute that global stocks have bounced back too fast after the COVID-19 pandemic.
  • Equity markets are likely to hit a correction in one to three years as central banks rollback stimulus efforts.
  • The MSCI ACWI Index of large- to mid-cap stocks worldwide has gained about 25% so far in 2021.
  • See more stories on Insider’s business page.

Stocks have been resilient after last year’s plunge into a bear market because of the COVID-19 pandemic but the recovery has moved too fast in the eyes of many investment professionals who say equities could face a correction in the next 12 months.

45% of respondents in a CFA Institute survey agreed that equities in their respective markets have “recovered too quickly.” The institute Tuesday released the results of its survey, which tallied responses from 6,040 members worldwide.

The results indicate that financial analysts believe there is a disconnect between economic growth fundamentals and capital markets caused in part by monetary stimulus, the institute said.

Central banks worldwide cut interest rates to ultra-low levels and increased asset purchases, among other actions, to foster economic recovery from the coronavirus crisis that forced a widespread shutdown of businesses and threw millions of people out of work. Those moves along with vaccinations of people worldwide from the respiratory disease have encouraged investors to embrace so-called risk assets including stocks.

In the US, the S&P 500 has gained nearly 12% since the start of 2021. That gain follows its 16.3% rise in 2020 after sliding into a bear market in March 2020 because of worries about the world’s largest economy falling into recession. The tech-concentrated Nasdaq Composite has also advanced this year, picking up 7%, although many large-cap tech stocks have dropped in favor of small-cap stocks of companies who are closely exposed to economic recovery. The Nasdaq soared in 2020 by 43.6%.

Meanwhile, the MSCI ACWI Index, representing large- and mid-cap stocks in 23 developed and 27 emerging markets, has picked up about 25% this year following its 16.3% rise in 2020. The MSCI ACWI ETF has bulked up by 11% during 2021.

But stocks are likely to run into a correction within one to three years as central banks begin to rollback stimulus as their respective economies mend from the pandemic, the survey respondents told the CFA.

“To me, it also indicates to authorities that monetary stimulus is not a simple or linear lever to pull given the complexity of the economic and financial ecosystem; there will be unintended consequences to consider in the future,” Paul Andrews, managing director of research, advocacy and standards at the CFA Institute, said in a statement.

Minutes from the Federal Reserve policy meeting in April indicated were moving closer to beginning discussions about potentially tapering economic support. The Fed has held its benchmark interest rate near zero and has bought at least $120 billion in assets each month to aid the economy through the pandemic.

The CFA Institute said 150,024 individuals received a survey invitation and the total response rate was 4%. The margin of error was plus or minus 1.2%.

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US stocks rally as investors weigh stalling retail sales and inflation guidance

Traders work on the floor of the New York Stock Exchange (NYSE)
Traders work on the floor of the New York Stock Exchange.

  • Stocks rose Friday even as April retail sales stalled from last month’s jump
  • Fed officials this week have been assuring investors that monetary policy will remain support for economic recovery.
  • Stocks were on course to rise for a second straight session.
  • See more stories on Insider’s business page.

US stocks rose Friday, remaining on higher ground following flat monthly retail sales as investors appeared to lock into assurances by Federal Reserve officials that they will stick with monetary policies that support economic recovery.

All three of Wall Street’s benchmark indexes were on track to build on Thursday’s gains that snapped a three-session losing streak. Advances for stocks Friday came even after the Commerce Department said retail sales in April were virtually unchanged from the previous month. The print missed the estimated 1% increase in sales from economists surveyed by Bloomberg.

Here’s where US indexes stood at 9:30 a.m. on Friday:

Retail sales boomed in March in part as Americans spent stimulus money sent to them by the government in an effort to help the economy continue improving after last year’s COVID-induced recession.

The miss in retail sales appeared to be offset by comments made Friday by Cleveland Fed Bank President Loretta Mester who said in Bloomberg Television on Friday that monetary policy is in a “good place” as officials still work on improving employment levels.

Her view on leaving policy where is it for now followed comments this week by Federal Reserve Governor Christopher Waller, Fed Governor Lael Brainard and Fed Vice Chairman Richard Clarida who said the central bank will look past likely transitory inflation pressures and stick with near-zero interest rates to aid the world’s largest economy.

Around the markets, Coinbase shares rose following the crypto exchange’s first-quarter results, and as the company said it will soon add dogecoin to its roster of digital currencies to trade.

Gold rose to $1,835 per ounce. Long-dated US treasury yields fell, with the 10-year yield at 1.632%.

Oil prices rose. West Texas Intermediate crude picked up 0.8% to $64.31 per barrel. Brent crude, oil’s international benchmark, climbed 1.3% to $67.89 per barrel.

Bitcoin rose 1.3% to $50, 383.

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Inflation fears are stoking volatility in stocks but they’re unlikely to derail the market rally, says UBS

NYSE traders
  • A jump in US inflation will stoke bouts of volatility in the stock market but it’s not likely to stop the overall rally, says UBS.
  • Consumer price inflation for April soared by more than expected, to a rate of 4.2%.
  • “We think that the reflation trade has further to run, UBS said Thursday.
  • See more stories on Insider’s business page.

US inflation rates are flying up and worries about an acceleration in prices ranging from airline tickets to energy have knocked stocks off their record highs, but those fears are unlikely to derail the overall rally in equities, wealth manager UBS said Thursday.

The “latest volatility does not come as a surprise. But we also don’t see it as signaling an end to the bull market,” Mark Haefele, chief investment officer of global wealth management at UBS, wrote to clients.

The arrival of April’s Consumer Price Index confirmed months of caution from economists who said stronger inflation was on the way, a reflection of ongoing economic recovery from the COVID-19 pandemic. The higher-than-expected headline and core inflation readings drove stocks sharply lower Wednesday.

Market pricing of the inflation outlook also stepped higher, said UBS, noting the US 10-year breakeven rate moved to imply an average inflation rate of 2.56%, close to the highest level since 2013 and up from 2% when 2021 got underway.

The CPI data triggered Wednesday’s selloff in stocks that left the S&P 500, the Nasdaq Composite, and the Dow Jones Industrial Average each down by at least 2%, with the Dow industrials tumbling 682 points.

“The latest rise in inflation, in our view, reflects year-over-year comparisons, which will fade,” he said. “While raw material prices may climb further, we believe the bulk of the rise in commodity prices is now over. In addition, labor supply headwinds should ease in the next few months once schools fully reopen, vaccinations continue to rise, and supplemental unemployment benefits expire.”

The CPI jumped to 4.2% from a year earlier, the largest increase since 2008, and core inflation, which strips out volatile energy and food prices, surged 0.9%, the largest one-month climb since 1982.

The UBS wealth management chief said it was important to note that major central banks have indicated they will not tighten policy in response to a temporary increase in prices. He outpointed that Federal Reserve Governor Lael Brainard said Tuesday the Fed will be “patient” as an inflation surge looks transitory.

“As inflation uncertainty persists, and as economic reopening remains on track, we think that the reflation trade has further to run. Our preferences include small-caps, financials, energy stocks, commodities, and emerging markets,” said Haefele.

Investors on Thursday appeared to set aside inflation worries, with Wall Street’s key stock indexes riding up roughly 1% each after weekly jobless claims hit another pandemic-era low.

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Dow soars 318 points to record high as investors weigh new economic-recovery data

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Traders work on the floor at the New York Stock Exchange.

  • The Dow Jones Industrial Average pushed to a record high on Thursday.
  • Stocks found support as fewer-than-expected Americans filed for jobless benefits.
  • Home Depot, P&G and Apple were all up, helping the Dow push to fresh highs.
  • See more stories on Insider’s business page.

The Dow Jones Industrial Average notched a new record high Thursday as stocks pegged to the reopening of the economy got a boost from new labor-market data.

The blue-chips index pushed higher with retailer Home Depot and consumer products giant Procter & Gamble among the best performing shares. Companies with exposure to economic recovery have largely advanced this year on the back of data showing the world’s largest economy is improving after the recession brought on by the COVID-19 pandemic.

The Labor Department on Thursday said jobless claims totaled an unadjusted level of 498,000 last week. That was less than the 538,000 claims expected, on average, by economists surveyed by Bloomberg. The reading marked a new low for the pandemic era and was the fourth consecutive weekly decline. The April jobs report due Friday could show US payrolls jumped to 938,000, according to an Econoday estimate.

Here’s where US indexes stood at 4:00 p.m. on Thursday:

Apple and Microsoft shrugged off earlier losses, aiding the Dow Jones Industrial Average.

The tech-heavy Nasdaq ended higher, though was in the red for most of the day.

Hilary Kramer, chief investment officer at Kramer Capital Research, noted that tech stocks are still struggling even as borrowing costs as implied by the 10-year Treasury yield have fallen below 1.6% after hitting 14-months highs above 1.7% earlier this year.

Nasdaq “valuations are completely out of whack with where we are with Main Street,” she told Insider on Thursday. “We have help-wanted signs everywhere from restaurants to mechanics shops … and what’s going to happen is people are going to stop spending.” She added that these pressures are being pulled forward to put the squeeze on tech stocks.

Around the markets, Etsy shares tumbled to five-month lows after the online marketplace said it expects quarterly sales on its platform to slow.

Peloton’s 15% sell-off following a treadmill recall has created a buying opportunity, according to Credit Suisse.

Gold rose 1.6% to $1,814.07 per ounce. Long-dated US treasury yields fell, with the 10-year yield at 1.561%.

Oil prices declined. West Texas Intermediate crude fell 1.2% to $64.83 per barrel. Brent crude, oil’s international benchmark, lost 1.2% to $68.11 per barrel.

Bitcoin fell 3% to $55,475.

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Stock market bullishness is at a 13-year high, but euphoric sentiment also means it may soon be time to sell, Bank of America says

NYSE Trader
  • Bank of America said bullishness in the stock market is the highest in 13 years.
  • But its contrarian Sell Side Indicator is very close to tilting into an area that will signal to investors that it’s time to sell.
  • BofA said it still prefers cyclical stocks.
  • See more stories on Insider’s business page.

Investors are the most enthusiastic about stocks since the global financial crisis more than 10 years ago but the market is edging closer to indicating that it’s time to sell, Bank of America said Monday.

Wall Street’s bullishness on stocks is a reliable contrarian indicator, BofA said in a note showing that its Sell Side Indicator rose to a 13-year high of 59.8% in April from 59.4% in March. The indicator is based on the average recommended equity allocation of Wall Street strategists.

The indicator is also 50 basis points away – at 60.3% – from the contrarian ‘sell’ threshold.

“Increasingly euphoric sentiment is a driver of our more cautious outlook as we believe that vaccine deployment, economic reopening, stimulus, etc. are largely priced in,” said equity strategists led by Savita Subramanian. “We have not seen a 5% pullback in six months … nor have we experienced a 10% correction in 14 months.”

Pullbacks in stocks occur on average 3 times per year and corrections historically are a once-per-year phenomenon, BofA said. A correction is widely considered a decline of 10% or more in an index or an asset from its most recent high.

The signal to sell stocks is at its closest since May 2007, after which the S&P 500 dropped by 7% in the subsequent 12 months, said BofA. The indicator is currently pointing to 12-month returns of 6%, a “much weaker outlook” compared with an average 12-month forecast of 14% since the end of the global financial crisis.

Bullishness among investors was on display through Wall Street’s three widely watched indexes which in April hit record highs. April proved to be a good month for US equities, with the S&P 500 index climbing by 5.2% and the Nasdaq Composite gaining 5.4%. The Dow Jones Industrial Average rose 2.7% and crossed above 34,000 for the first time. Investors pushed stocks up as corporate earnings have come in ahead of analyst expectations and more economic data point to further recovery in the world’s largest economy from the COVID-19 pandemic.

Equity allocations since March 2020 have risen more than 3.5 times faster than they typically do following bear markets, the strategists said. Stocks crashed in March of last year as the coronavirus health crisis accelerated.

“Lofty valuations, juxtaposed against the potential for bad inflation, rising rates, and higher taxes on corporates and consumers. But we are bullish on economic / profits / capex growth, driving our preference for cyclical stocks,” wrote Subramanian.

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Share buyback plans have boomed and should help the US stock market continue to soar higher, research firm says

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  • Corporate buyback announcements ‘exploded’ as trading in April wrapped up and that helped push stocks higher, said Vanda Research.
  • A jump in buybacks should help soften the blow in the US equity market in the event of a drawdown.
  • “As net equity supply shrinks every dollar invested in the US market will have a larger marginal impact,” said Vanda.
  • See more stories on Insider’s business page.

There’s been a surge in planned corporate share buybacks and that should help support US stocks as they trade around record highs, according to independent equity research firm Vanda.

Share buyback announcements “exploded” last week, led by Apple saying its board has authorized an increase of $90 billion in its existing share repurchase program and with Google’s parent company Alphabet saying its board greenlighted the repurchase of up to an additional $50 billion of its own stock.

The announcements contributed to the advance in US stocks as investors wrapped up trading in April that left the S&P 500 and the Nasdaq Composite each gaining at least 5% for the month and the indexes not far off from record highs.

The planned buybacks should also help the stock market in two ways, said Vanda Research, whose VandaTracks arm tallies retail investing activity in 9,000 individual stocks and ETFs in the US.

“In the event of a drawdown, corporate desks will buy shares at discounted valuations, cushioning the blow from institutional selling,” wrote Vanda Research senior strategist Ben Onatibia and analyst Giacomo Pierantoni in a note published Monday.

Secondly, they say net equity supply will be negative through 2021, even if the recent rise in IPOs and share offerings is sustained. Companies in the US have been issuing new shares at an annualized pace of US$660 billion through April, while S&P companies have announced $860 billion worth of buybacks annualized.

“As net equity supply shrinks every dollar invested in the US market will have a larger marginal impact and could perpetuate the outperformance of US equities,” versus the equity markets worldwide, Vanda said.

Bank of America recently said Wall Street may be on track for $900 billion of gross S&P 500 buybacks in 2021.

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