When you trade stocks: Are you losing money?
In the past few years, many big companies have been losing money on their stock buybacks, and that’s hurting the industry’s ability to attract new investors, said Matt Wiles, an analyst at Jefferies.
Investors are hesitant to fund a company that’s trading in the red, and companies have become more aggressive in making buybacks more aggressive.
And as the industry has gotten bigger, so have its share prices.
For example, the S&P 500 has jumped to more than 18,000 points, more than two percentage points above its all-time high of 18,903.
The Nasdaq has jumped 4.3% to 1,971.90, while the Dow Jones Industrial Average has climbed more than 4.4% to 22,942.80.
That’s a big jump in price for some stocks.
For instance, the SPDR S&p 500 ETF, which tracks stocks with the same name as the S &M index, has gained more than 8% since Jan. 10.
The S&s has risen nearly 10% in the past year.
For many companies, the new buyback strategies have also added to volatility.
For companies like Apple, for example, their buyback efforts have increased in recent months as investors have become less willing to give up on stocks in the face of a weaker economy.
“The demand is getting bigger and bigger,” said Adam Jonas, an adviser at CME Group Inc., a broker and investment bank.
“There’s no reason to sell now.
You don’t need to sell it now.”
B stock index has risen more than 3% this year.
Some investors are taking a wait-and-see approach, Jonas said.
“I don’t see the stock market turning into a bear market,” he said.
The Dow Jones industrial average has jumped more than 2.5% this week.
But that’s largely because the market has risen faster than expected this year, Jonas added.
“This is a new year and we’re just seeing some volatility,” he added.
Investors have also worried that if the Dow is down, the price of gold is likely to go up.
Gold futures, the biggest way to invest in the precious metal, rose 0.7% Tuesday to trade at $1,244.30 an ounce.
The price of the precious metals is a key gauge of global markets, which tend to be higher in winter.
The gold market has been on a roller coaster of highs and lows.
Last week, it soared past $1k an ounce for the first time in almost a decade, while last week, the rally was halted after reports of a hacking attack in which hackers stole more than $US40 billion.
The Federal Reserve has been trying to help markets recover from the global economic crisis by buying more bonds and buying more debt to help keep the financial system stable.
But gold has been trending higher for some time.
Gold has been surging on hopes that the Fed could help the markets, but that expectation has been dashed this year by geopolitical tensions in the Middle East.
The Fed’s buyback program has been criticized for boosting prices.
And gold has fallen in value in the last few months.
Gold fell about 2% Tuesday, according to the Metals Exchange.
“It’s hard to imagine what the market could do without a Fed buyback,” said Stephen Biddle, an investment analyst at UBS AG in New York.
“They’ve put their finger on the pulse of the market and said we need to get back to where we were.”
The Fed has been making several moves to try to spur the market back toward its long-term trend.
It increased interest rates to help boost the economy.
And last month, it boosted its holdings of short-term debt to $US1.5 trillion.
“We’ve been doing everything we can,” Fed Chair Janet Yellen said in a speech last month.
“If we want to get out of this crisis we need them to do more.”
Some stocks are also getting a boost from their own buybacks.
The U.S. Army has been buying back more than 50 million rounds of ammunition to help bolster its firepower, according the U.N. Security Council.
That money is helping the military keep up with growing demand for the ammo, according Reuters.
But the U-Haul trucking company says it’s getting a windfall of more than half a billion dollars from its own buyback.
The company, which is currently one of the largest trucking companies in the world, is spending more than US$5 billion a year on buybacks to help support its workforce.
The trucking industry has seen an explosion in demand for military equipment over the past decade.