U.S. Share Buybacks Hit Record While Capex Lags Pre-Crisis Level

Share repurchases more than doubled from a year earlier for S&P 500 companies to an all-time high of $234.6 billion, according to preliminary data released Tuesday from S&P Dow Jones Indices. Meanwhile, capital expenditures increased 21% to $189 billion, which is still down 3% from the final three months of 2019 before the pandemic shutdown the economy.

“Borrowing is inexpensive for corporations right now, so financing their capital spending was expected -- but those expectations still haven’t been met,” Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, said in an interview. “Part of the reason could be related to the pandemic, as a shift in consumer demand has fueled lots of uncertainty for businesses and makes it difficult for companies to plan ahead.”

Companies typically ramp up spending on factories, equipment and other capital goods as they grow more confident in their financial outlook and the economy. Given uncertainties about the outlook, buybacks have been a way for businesses to return cash to shareholders and have helped propel U.S. stock indexes climbing to multiple records this year.

Markets have also benefited from the monetary and fiscal support that the Federal Reserve and policy makers in Washington put in place to help support the economy in the pandemic.