Keith Schneider | Dec 12, 2021 11:23PM ET
You might recall our article from last weekend regarding “painting the tape” where we alluded to the Fed (Plunge Protection Team) coming into the market late that week on Friday and buying stocks to “prop” up the market.
While we are certain this occurred, we now learn from Bank of America (NYSE:BAC) and Goldman Sachs (NYSE:GS) that corporations saw the brief and significant pullback as an opportunity to buy back their own stock.
In essence, it is another group of artists adding to the stunning upside picture this year. For those not familiar with this concept, there are several reasons corporations buy back stock:
We now have learned that the week of Nov. 29 and especially Friday Dec. 3, late afternoon, was just such opportunity. Moreover, given the seasonality and typical inflows of capital from bonuses, year-end partnership distributions, and the possibility of a year-end “Santa Claus” rally, it seemed to be a good time to put these repurchases into action.
Bank of America reported a surge of $6.7 billion in repurchases came in during this recent pullback, exceeding all estimates from the firms that track repurchases. They also point out that 40% of the net buying of equities is due solely to repurchases this year.
The NASDAQ is up around 23% this year and fully 64% of that return is due solely to 5 stocks: Microsoft (NASDAQ:MSFT), Google (NASDAQ:GOOGL), NVIDIA (NASDAQ:NVDA), Apple (NASDAQ:AAPL), and Tesla (NASDAQ:TSLA). At least 3 of these firms are the largest corporations repurchasing their shares this year.
The chart below shows how big this share repurchasing has been throughout 2021:
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