Tax cut sparks record-setting $178 billion buyback boom

1. It's raining buybacks: Corporate America is throwing a record-setting party for shareholders....

Posted: May 21, 2018 2:27 AM
Updated: May 21, 2018 2:27 AM

1. It's raining buybacks: Corporate America is throwing a record-setting party for shareholders.

S&P 500 companies showered Wall Street with at least $178 billion of stock buybacks during the first three months of 2018, according to Howard Silverblatt of S&P Dow Jones Indices.

That's a 34% bump from last year and tops the prior record of $172 billion set in 2007, just prior to the start of the Great Recession. Apple rewarded shareholders with $22.8 billion in buybacks -- the most of any company in any quarter ever.

Total S&P 500 shareholder payouts -- buybacks plus dividends -- for the past 12 months could top $1 trillion for the first time ever, Silverblatt said.

The buyback bonanza occurred during the first full quarter after President Donald Trump signed into law a massive corporate tax cut that was supposed to lift business spending on job-creating investments.

The tax law reduced the corporate tax rate to 21% from 35% and gave companies a break on taxes owed when returning foreign profits. That one-two punch allowed companies to reap huge profits, a sizable chunk of which have been returned to shareholders. Profits had already been on the rise thanks to the accelerating economy.

Buybacks are clearly booming, more than 5.5 million employees received a tax cut bonus, pay raises or 401(k) hikes, according to the White House. But business spending -- the stated goal of the tax law -- has not significantly accelerated, at least not yet.

Related: Tax cut will drive innovation, ex-Home Depot CEO says

One broad measure of business spending, real nonresidential fixed investment, rose by 6.1% during the first quarter. That's solid growth signaling a strong economy. However, it was roughly in-line with the past several quarters. It even marked a slight deceleration from the final three months of 2017.

That means companies have not significantly boosted spending on equipment, factories and other investments that create jobs and boost wages.

Some economists aren't surprised that the early windfall of the tax cuts is going to Wall Street, instead of Main Street. They note that companies have long had access to tons of cash.

"If they had plenty of cash, you shouldn't really expect having access to more would lead them to invest," said Alan Auerbach, director of Berkeley's Robert D. Burch Center for Tax Policy and Public Finance.

2. Mark Zuckerberg faces the European Union: Facebook's CEO will meet senior members of the European Parliament as soon as next week to discuss how Facebook uses personal data.

Antonio Tajani, the parliament's president, said he hopes Zuckerberg can restore the confidence of Facebook's European regulators and customers.

The parliament will also organize a series of committee hearings with Facebook representatives and other tech companies, though Zuckerberg is not expected to attend.

Facebook faces scrutiny around the world following the Cambridge Analytica data scandal. Zuckerberg testified before the US House of Representatives and the Senate in April, but he has refused to testify before the United Kingdom's parliament.

3. Rollback of Dodd-Frank: The House is set to vote next week on a Senate bill that would cut Obama-era regulations for thousands of community banks and regional lenders, including State Street, BB&T and SunTrust.

The bill would raise the threshold at which banks are considered "too big to fail." More than two dozen midsize US banks would be shielded from some Federal Reserve oversight.

They would no longer have to hold as much capital to cover losses on their balance sheets. They would not be required to have plans in place to be safely dismantled if they failed. And they would have to take the Fed's bank health test only periodically, not once a year.

4. Home sales: The economy is booming, inflation is picking up, interest rates are rising, and people are scrambling to buy the limited supply of homes available on the market.

On Wednesday, the Commerce Department will report the number of new homes sold in April. New home sales surged to a four-month high in March.

But existing home sales have only been inching higher. Homeowners are reluctant to sell as home prices and mortgage rates soar. They worry that their next homes will be more expensive than the ones they live in now - even if they can get a lot more money for their current homes. The National Association of Realtors will report Thursday how many homeowners sold their homes last month.

Mortgage rates hit a seven-year high this month. The average rate on a 30-year fixed mortgage has jumped to 4.61%, according to Freddie Mac.

5. Europe's new data protection law: On Friday, the European Union will start to enforce a sweeping new data protection law that will give consumers much more control over how their personal details are used.

Regulators say the rules are necessary to protect consumers in an era of huge cyberattacks and data leaks, highlighted by Facebook's admission that the personal details of millions of its users were improperly harvested.

The EU General Data Protection Regulation applies to any organization that holds or uses data on people inside the European Union. Google, Facebook and other tech companies must comply. You've probably already seen emails from tech companies explaining their new privacy policies as businesses scramble to get up to code before the rules go into effect.

6. Coming this week:

Tuesday - Kohl's reports earnings

Wednesday - New home sales report; Lowe's, Tiffany and Target and L Brands report earnings

Thursday - Existing home sales report; Best Buy and Gap report earnings

Friday - EU General Data Protection Regulation goes into effect

Minnesota Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 21315

Reported Deaths: 890
CountyConfirmedDeaths
Hennepin7168539
Ramsey243797
Stearns195012
Nobles14692
Anoka121056
Dakota110235
Olmsted56210
Washington52729
Kandiyohi4681
Rice3862
Clay37324
Scott3582
Wright2531
Sherburne2142
Todd2040
Mower1891
Carver1742
Benton1672
Steele1410
Martin1255
Blue Earth1151
St. Louis11113
Freeborn930
Pine850
Winona7815
Carlton730
Nicollet695
Cottonwood640
Otter Tail600
Polk592
Watonwan560
Crow Wing561
Goodhue552
Itasca537
Chisago481
Dodge440
Chippewa420
Meeker420
Le Sueur411
Jackson390
Morrison380
Becker370
Murray350
Lyon340
Douglas290
Isanti280
McLeod270
Waseca250
Unassigned229
Rock210
Mille Lacs171
Fillmore171
Swift160
Wabasha160
Brown122
Beltrami120
Faribault120
Sibley120
Wilkin113
Cass112
Kanabec111
Norman110
Pipestone100
Marshall90
Pennington90
Pope80
Aitkin60
Wadena60
Koochiching60
Yellow Medicine60
Renville50
Mahnomen51
Lincoln50
Clearwater30
Big Stone30
Traverse30
Lac qui Parle30
Red Lake30
Redwood30
Grant20
Houston20
Roseau10
Hubbard10
Lake10
Kittson10

Iowa Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 17533

Reported Deaths: 456
CountyConfirmedDeaths
Polk3774108
Woodbury262424
Black Hawk168239
Linn93575
Marshall87011
Dallas85714
Johnson6027
Muscatine54539
Wapello5144
Crawford4862
Tama39423
Scott3379
Louisa3347
Dubuque32316
Jasper25616
Buena Vista2430
Pottawattamie2126
Sioux2070
Washington1808
Wright1220
Allamakee1184
Plymouth1160
Warren1110
Story951
Poweshiek888
Mahaska856
Bremer676
Henry611
Clinton601
Des Moines551
Boone550
Cedar461
Guthrie433
Taylor390
Benton371
Jones360
Clarke350
Iowa330
Monroe334
Osceola320
Buchanan320
Shelby310
Clayton303
Marion290
Webster271
Hamilton260
Fayette260
Monona240
Madison241
Winneshiek230
Lee220
Cerro Gordo221
Davis200
Grundy190
Lyon190
Harrison190
Jefferson180
Floyd181
Mills160
Cherokee160
Butler150
Delaware150
Keokuk140
Greene130
Sac130
Hardin130
Humboldt130
Ida130
Howard120
Jackson120
Appanoose123
Hancock120
Audubon111
Cass110
Van Buren100
Clay100
Page100
Winnebago100
Carroll90
Dickinson90
Franklin80
Adair80
Chickasaw80
Emmet70
Union70
Kossuth70
Unassigned60
Lucas60
Montgomery60
Adams50
Ringgold40
Fremont40
Mitchell40
Pocahontas40
Palo Alto30
Worth30
Calhoun20
Wayne10
Decatur00
Rochester
Broken Clouds
63° wxIcon
Hi: 78° Lo: 62°
Feels Like: 63°
Mason City
Few Clouds
65° wxIcon
Hi: 78° Lo: 65°
Feels Like: 65°
Albert Lea
Scattered Clouds
64° wxIcon
Hi: 75° Lo: 65°
Feels Like: 64°
Austin
Clear
66° wxIcon
Hi: 79° Lo: 65°
Feels Like: 66°
Charles City
Broken Clouds
66° wxIcon
Hi: 79° Lo: 65°
Feels Like: 66°
Storms a brewin'
KIMT Radar
KIMT Eye in the sky

Latest Video

Image

Weather 5/25

Image

Honoring Veterans During a Pandemic

Image

Loud Mouth Brass Band spreads cheer to residents in Slattery Park

Image

Finding the silver lining during the pandemic

Image

Will Memorial Day cause a coronavirus spike?

Image

Can you catch Covid-19 from mosquitos?

Image

125 Live Restaurant partnership

Image

Taps in City Park

Image

100 Most traveled days in MN have begun

Image

Parade in the park

Community Events