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The Delta variant is keeping more companies cautious about how to invest the mountains of cash they have at their disposal. That hesitancy has led, in part, to corporate spending on stock buybacks outpacing capital expenditures this year. 

Why it matters: Companies hoarded cash and raised prices over the past year — leaving them with a lot of money and decisions about what to do with it.

  • Many who wanted to reinvest in their businesses by spending on new equipment, found limited inventory to buy due to supply chain delays.
  • Buybacks, which were restricted last year, are viewed as a more flexible option. They are easier to pull back compared with other forms of capital investment, Howard Silverblatt, a senior index analyst at S&P Dow Jones Indices, told the Wall Street Journal. 

Driving the news: Dell, News Corp, McDonald's and Lockheed Martin all announced buyback plans last week.

Catch up quick: Buybacks among S&P 500 companies reached $370.4 billion, up 29% in the first half of this year versus the same period in 2020, according to S&P Global Market Intelligence via the Journal.

  • Capital expenditures reached $337.2 billion, up 4.8%. 

Yes, but: Buybacks from the top 20 companies made up the majority (55.7%) of last quarter's buybacks — up from pre-pandemic historical averages (44.5%) but down from last year (87.2%), according to S&P Dow Jones Indices

The big picture: Capital spending started to pick up in the second quarter of this year, eclipsing pre-pandemic levels, especially in areas of technology as the world moved to a remote work environment. 

What they’re saying: Even though the absolute number of dollars spent on buybacks is high, the yield — what’s been repurchased compared to market caps — is low and still below pre-pandemic levels, Saira Malik, chief investment officer for Nuveen, tells Axios. 

  • “Corporate buybacks are a sign of confidence in a company’s own business model [as well as] a sign of confidence in the stock market and with valuations where they are,” she added.

The intrigue: Part of the hesitation to repurchase shares even more strongly is because of this market rally, according to Malik.

  • “Some corporates are more concerned about the valuations of the stock price and want to make sure that if they're going to increase buybacks, they're doing it when they feel that their stock price is more attractive.”

What to watch: Buybacks may reach a peak by early 2022, says Malik.

  • New taxes, proposed to help pay for President Biden’s domestic spending plan, could play a role in decreasing buyback levels.

Go deeper

Oct 12, 2021 - Economy & Business

Consumers have lots of cash, but less to buy this holiday season

Illustration: Sarah Grillo/Axios

After more than a year of pandemic-related abstinence, people are in a spending mood this holiday season. The problem is there's going to be less stuff to buy.

Why it matters: Global supply chain logjams have left many retailers with empty shelves. And the bottlenecks are getting worse, not better, Bloomberg reports.

10,000 trees near giant sequoia groves to be removed after fires

A firefighter looks up at a giant sequoia tree after fire burned through the Sequoia National Forest near California Hot Springs, California, on Sept. 23. Photo: Patrick T. Fallon/AFP via Getty Images

"Upwards of" 10,000 trees near giant sequoia groves have been "weakened by drought, disease, age, and/or fire" and must be removed in the wake of California's wildfires, the Sequoia and Kings Canyon National Parks announced.

Why it matters: The damage to these trees, considered "national treasures," and work to remove them means a nearby key highway must remain closed to visitors as they have "the potential to strike people, cars, other structures, or create barriers to emergency response services," per a statement from the national parks.

Obama stumps for McAuliffe, urges Virginians not "to go back to the chaos"

Photo: Win McNamee/Getty Images

Former President Barack Obama framed a Nov. 2 gubernatorial race as a bellwether for the Democratic Party and the country, telling a crowd at a campaign event for Terry McAuliffe on Saturday that "I believe you, right here in Virginia, are going to show the rest of the country and the world that we're not going to indulge in our worst instincts."

Why it matters: With just over a week to go before Election Day in the Commonwealth, McAuliffe is bringing out the big guns. The 44th president appeared on the campus of Virginia Commonwealth University to urge supporters to get to the polls.

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