'Big money' digs deep to prop up stock market
Big money is trying to stomp out the fear gripping the markets by putting its cash where its mouth is.
Big banks, big-time executives and big companies are all digging deep to buy this market — providing a much-needed bid for stocks as fear cascades and threatens to turn the sell-off into something worse. The effort seems to be paying off — for now. After days of vicious selling, the Standard & Poor's 500 is up more than 1%, and the Dow Jones industrial average is rallying more than 200 points to 15,868.
Investors fretting that the market's decline this year is a harbinger of big problems need a hand to hold. The Standard & Poor's 500 has sunk 10.5% this year as investors fret over dropping oil prices, economic slowing in Asia and Europe and rising bond defaults.
Seeing big investors step up, hold their noses and buy gives the market an vote of confidence that speaks louder than anything economists, market forecasters or even Federal Reserve head Janet Yellen can say.
Here are some ways big money shows confidence in the market:
* Big-time buybacks. This year, 19 companies in the Standard & Poor's 500, including Amazon.com (AMZN), Chipotle Mexican Grill (CMG) and biotech Gilead Sciences (GILD) announced they will buy back their own shares, according to a USA TODAY analysis of data from S&P Global Market Intelligence. Collectively, these companies plan to spend more than $60 billion on these buybacks. Buybacks — though controversial over how much they actually benefit investors — do show a company deems its stock so attractively priced its own shares are one of the best places to put its cash. Stock buybacks can provide buying support for stocks that are under pressure. Amazon plans to spend $5 billion on its own stock, which translates into 9.8 million shares, or 2% of the shares outstanding. Shares of Amazon are down 21% to $508 a share. Others look to be even more aggressive. FedEx (FDX) plans to buy 25 million shares, which is nearly 10% of its shares outstanding.
* Executives step up and buy. A dozen CEOs of S&P 500 companies, including Michael Corbat at Citigroup (C), Stephen Wynn of Wynn Resorts (WYNN) and Stephen Luczo of computer hard-drive maker Seagate Technology (STX) have stepped up and bought shares of their companies in the open market at least once this year, according to a USA TODAY analysis of data from S&P Global. These are purchases at market prices — not buys made at steep discounts connected with options exercises — showing real faith in the stock and company. Jamie Dimon of JPMorgan Chase (JPM) was the latest CEO to step up buying nearly $27 million of the bank's shares. That's real money — even for Dimon — as it equals his total pay in fiscal 2014. Shares of JPMorgan jumped $3.95, or 7.5%, to $56.98 a share after Dimon's move.
* Banks lend buying support. Beleaguered banks show their confidence by using their own cash to make a statement. Germany's Deutsche Bank told investors it would buy $5.4 billion of its debt. Showing it has faith in its debt helps cool the panic and worry that it's loaded with troubled loans. Shares of Deutsche's stock shot up $1.64, or 12%, to $15.33 in European trading. Shares are still down 50% over the past year.
Banks to investors: We're safe
It's important to note that even big money can be wrong, but at least investors know they have good company if the global financial sell-off continues.
S&P 500 COMPANIES ANNOUNCING STOCK BUYBACKS THIS YEAR*
Company, symbol, key of announcement
3M, MMM, Feb. 2
Akamai, AKAM, Feb. 10
Alliance Data, ADS, Jan. 6
Amazon.com, AMZN, Feb. 10
Brown-Forman, BF, Jan. 28
Chipotle Mexican, CMG, Jan. 6 and Feb. 3
Dr Pepper Snapple, DPS, Feb. 11
FedEx, FDX, Jan. 26
Gilead Sciences, GILD, Feb. 2
Kellogg, K, Feb. 11
L Brands, LB, Feb. 6
PayPal, PYPL, Jan. 28
Pfizer, PFE, Feb. 2
Ryder System, R, Feb. 2
Schlumberger, SLB, Jan. 21
Hershey, HSY, Jan. 28
Interpublic Group, IPG, Feb. 12
Tiffany, TIF, Jan. 21
Time Warner, TWX, Feb. 10
Source: S&P Global Market Intelligence, USA TODAY
* as of market close 2/11/2016