Wall Street Lunch: Tough Road Ahead For Buybacks

Stock Buyback text on sticky notes with office desk. Stock Market Exchange Concept

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J.P. Morgan predicts a worse outlook for income investors in 2024. (0:15) Fisker Automotive CEO fights for the stock. (2:50) Trump tapping Jamie Dimon for Treasury Secretary? (4:02)

This is an abridged transcript

Our top story so far

End-of-year stock buyback announcements continue. But the landscape looks less promising in 2024 when it comes to returning cash to shareholders.

After announcing a 5.3% increase in dividend, Bristol Myers Squibb (BMY) authorized the repurchase of an additional $3 billion of its common stock under the company’s multi-year repurchase program. The announcement increases the total buyback authorization to about $5 billion.

That comes on the heels of Northrop Grumman (NOC) approving an additional $2.5 billion in buybacks, increasing the outstanding authorized amount to about $3.8 billion.

J.P. Morgan is predicting diminished corporate enthusiasm for both buybacks and dividends next year.

The equity team says “Buyback executions peaked in 2022 and corporates continue to recalibrate payouts given elevated economic uncertainty, shrinking margins, higher cost of debt, and tight capital requirements for Financials.”

They predict gross buybacks falling another ~5% to ~$750 billion, down $50 billion from ~$800 billion in 2023 and “sharply lower from peak activity of $950 billion in 2022.”

They say dividends will remain stable, but there’s “little urgency to raise.”

“With stocks moving sideways for the last two years, there is little rush for S&P 500 companies to increase dividends with the dividend yield of 1.6% near 5yr average of 1.7%.”

In today’s trading

Growth stocks are riding higher, with the Magnificent 7 leading the posse.

The Nasdaq (COMP.IND) is up more than +1%, with the S&P (SP500) solidly higher, but the Dow (INDU) up just slightly.

Six of the 7 are up more than 1%, despite a small rise in yields. Oil (CL1:COM) is up, but below $70.

Weekly initial jobless claims came in about as expected, up +220,000.

Pantheon Macroeconomics says “The usual late-cycle story in these numbers is a sustained increase in initial claims, but this cycle is unusual in multiple ways.”

“With that in mind, the sustained increase in continuing claims looks like a warning sign of emerging labor market stress, as people who have lost their jobs are taking much longer to find new ones. The rising proportion of people who think that jobs are becoming harder to get, according to the Conference Board’s consumer confidence survey, tells the same story.”

Among active stocks

The CEO of EV maker Fisker Automotive (FSR) issued a statement regarding negative reports about the company that he says have been overblown.

Henrik Fisker said: “We have made considerable progress on our business plan and achieved many firsts in the industry, including launching in 11 countries to date and delivering the most sustainable EV with the longest range in our category. Fundamentally, our business is making positive strides each day and I believe we have compelling long-term opportunities. The Fisker team are shareholders, and I am a significant shareholder in the company as well.”

Bank of America downgraded Take-Two (TTWO) to Neutral from Buy with a $170 price target on the assumption that Grand Theft Auto VI won’t launch until closer to the end of 2025.

Analyst said current earnings estimates assume the game will hit the market in March of 2025 and those estimates are likely to tumble 20% before August with a later release. Not all investors are likely to have enough patience to wait, they said, adding there’s not enough known about the quality of the upcoming game based on the recently-released trailer and footage that leaked.

Robinhood Markets (HOOD) is launching commission-free crypto trading in the European Union a week after it announced plans to bring its stock trading app to the U.K. early next year.

In other news of note

In speculation about Cabinet appointments if there were to be a second Trump administration, Axios said Donald Trump would consider JPMorgan Chase (JPM) Chairman and CEO Jamie Dimon for the Secretary of Treasury.

“He wants a big name,” a person close to the campaign told Axios. “And he loves billionaires.”

It’s unlikely Dimon, who is a Democrat, would accept. At the New York Times Dealbook Conference last month, Dimon said Nikki Haley is “a choice on the Republican side that might be better than Trump.”

And in the Wall Street Research Corner

Goldman Sachs is out with its analysis of hedge fund and mutual fund positioning.

Among its analysis is a screen of the biggest hedge funds long positions and the stocks where mutual funds are most overweight.

Among the stocks that are loved by mutual and hedge funds alike are some very familiar names, including (AAPL), (AMD), (BRK.B), (MSFT), and (NVDA).

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