Illustration: Rebecca Zisser/Axios

Share buybacks contributed about half of S&P 500 companies’ earnings growth in the first quarter, a new report from JPMorgan shows.

Why it matters: "This is corporate executives saying, 'Rather than investing back into the business by making capital expenditures or buying equipment, I’m just going to buy my own shares,'" says David Kelly, a global market strategist at JPMorgan Asset Management, which published the report.

  • "That says a lot about your view of the long-term prospects for your business."

Quick take: Buybacks accounted for the highest share of EPS growth since 2007, and Q1's share was almost 8 times higher than the average from 2001 to 2018, the bank found.

The big picture: S&P earnings growth has been a major worry for stock analysts this year, after 2018's blowout earnings following the passage of the Tax Cut and Jobs Act. The permanent reduction in corporate taxes was backed by President Trump and Congressional Republicans as a catalyst for a boost in wages and long-term investment.

  • While companies have slightly raised compensation and increased spending on business infrastructure and R&D, the overwhelming majority of tax cut savings has been spent by firms to buy back their own shares.
  • The trend has gotten so strong that Moody's warned in May companies were spending more on buybacks and dividends than they were paying in taxes before the cut.

Remember: Stock prices typically are tied to salaries and job performance reviews for top executives and boards, the very people making the spending decisions.

  • Companies spent more than $1 trillion buybacks last year and are on pace to spend more in 2019.
  • Earnings also were particularly low in Q1, Axios' Felix Salmon points out, making the increased level of buybacks an even larger percentage.

The last word: JPM's Kelly says the rising level of stock buybacks is one major reason he and other market analysts are worried about continued growth of business output, stock prices and the broader economy.

  • "This is probably one of the bigger issues that we’ve been talking about."
  • "It could perpetuate the slower growth environment we’ve seen in this expansion."

Go deeper: Too much money (and too few places to invest it)

Go deeper

Dion Rabouin, author of Markets
32 mins ago - Politics & Policy

Wall Street fears stimulus is doomed

Illustration: Sarah Grillo/Axios

The fight over a new Supreme Court justice will take Washington's partisan bickering to a new level and undermine any chance for needed coronavirus relief measures before November's election, Wall Street analysts say.

What we're hearing: "With the passing of Justice Ginsburg, the level of rhetorical heat has increased, if that seemed even possible," Greg Staples, head of fixed income for the Americas at DWS Group, tells Axios in an email.

Updated 1 hour ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 7 a.m. ET: 31,346,086 — Total deaths: 965,294— Total recoveries: 21,518,790Map.
  2. U.S.: Total confirmed cases as of 3 a.m. ET: 6,858,130 — Total deaths: 199,890 — Total recoveries: 2,615,949 — Total tests: 95,841,281Map.
  3. Health: CDC says it mistakenly published guidance about COVID-19 spreading through air.
  4. Media: Conservative blogger who spread COVID-19 misinformation worked for Fauci's agency.
  5. Politics: House Democrats file legislation to fund government through Dec. 11.
  6. World: U.K. upgrades COVID alert level as Europe sees worrying rise in infections — "The Wake-Up Call" warns the West about the consequences of mishandling a pandemic.
2 hours ago - Technology

Why Puerto Rico is still struggling to get online

Illustration: Sarah Grillo/Axios

Internet connectivity remains a weak link for the disaster-wracked U.S. territory Puerto Rico, and some experts fear a new tranche of Federal Communications Commission subsidies set aside just for the island might not help the people most in need of a broadband connection.

Why it matters: Puerto Rico is locked out of most federal funding available to U.S. states to help expand internet service. The island risks being left behind as carriers expand and upgrade high-speed internet networks elsewhere, even as infrastructure-damaging tropical storms come faster and harder and the pandemic makes broadband even more of a must-have.

Get Axios AM in your inbox

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Subscription failed
Thank you for subscribing!