Some of the biggest buyers of stock were on the sidelines last week, right when the market tumbled.
Companies spend billions of dollars buying back their own stock, which helps support stock prices and boost earnings per share. But there’s generally a lull in buyback spending in September and October. That means a traditional source of demand was weak, just as worries about slowing global economic growth caused many investors to sell.
It all stems from the calendar: Many companies limit their stock purchases in the weeks leading up to their earnings announcements to avoid insider trading concerns. And the bulk of companies in the Standard & Poor’s 500 index are in the midst of reporting third-quarter results.
But once their reports are out, purchasing often ramps up. The top five purchasers of their own stock in the second quarter, including No. 1 Apple, will all have released their results by the end of October.
November and December are historically among the most active months for repurchases, according to Goldman Sachs. That’s one reason the bank’s strategists expect the S&P 500 will rise to 2,050 by the end of the year, a 6.4 percent gain from Wednesday’s close. Associated Press
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