Oct 14, 2019

Corporate buybacks and the Fed could power stocks higher this year

Fed Chairman Jerome Powell. Photo: Chen Mengtong/China News Service/VCG via Getty Images

While the most talked-about news on Wall Street proved to be a downer, U.S. equities are poised to get a power boost from 2 big sources soon.

Driving the news: On Friday, the Fed announced plans to buy $60 billion of U.S. Treasury bills a month “at least into the second quarter of next year.”

Why it matters: Despite the central bank's insistence that the cash injections “do not represent a change” in its monetary stance, it will help boost market liquidity and help stave off a crunch analysts were predicting could torpedo the stock market later this year.

  • Fed funds futures prices also show traders see nearly a 78% chance the Fed cuts interest rates for the third time this year at its October meeting and a 27.5% chance of a fourth cut at its December meeting, according to CME Group's FedWatch tool. That would provide even more liquidity.

The market could also be buoyed by its old friend corporate buybacks. Companies increased buys of their own shares in the third quarter after a notable slowdown in the second.

  • Buybacks in Q3 were up 27% from their level in Q3 2018, analysts at Bank of America Merrill Lynch said in a note to clients. The biggest sector driver was health care companies, which reported "near-record weekly buybacks" last week, and buybacks overall "have remained stronger than usual ahead of earnings season."

Go deeper: Fed's Kashkari is sick of Wall Street's whining

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Wall Street loves a party

Illustration: Sarah Grillo/Axios

Investors put their recession umbrellas back in the closet last week and broke out their party hats, as all three major U.S. stock indexes hit fresh record highs. The market is bullish on the expected pause in President Trump's trade war with China and market participants have plenty of ammo to drive stocks higher.

What's happening: Investors are moving back into risky assets like stocks in a big way and selling out of traditionally safe ones.

Go deeperArrowNov 11, 2019

Fed's Kashkari is sick of Wall Street's whining

Photo: John Lamparski/Getty Images

Minneapolis Fed President Neel Kashkari has had it with the "hubris and stupidity" of Wall Street bankers. "Honestly, my patience for these market opinions is basically gone," Kashkari told Axios in an exclusive interview.

Driving the news: His latest grievances are with investors who claim the Fed is being bullied by President Trump and traders pointing fingers at the central bank for the liquidity crunch in the repo market, which the Fed just announced a $60 billion a month standing facility to address.

Go deeperArrowOct 14, 2019

It could be a wild week for the stock market and economic reports

Photo: Drew Angerer/Getty Images

This week will set the table for the fourth quarter in what's been a wild and highly unusual year. The stock market has risen more than 20% in 2019, but that's largely been because of a recovery from December's selloff in the first quarter.

The big picture: "Everybody’s squared up" in anticipation, says Ellis Phifer, market strategist at Raymond James. But this week has the potential for "all hell to break loose."

Go deeperArrowOct 28, 2019