Wall Street is about to lose a $1.1 trillion buyer: why stocks could get bumpier

One of Wall Street’s most dependable buyers is about to become less active.

More than $1.1 trillion of announced corporate buyback authorisations had moved back into open repurchase windows through late August, helping support US equities during the summer rebound.

But that support is set to thin as companies enter pre-earnings blackout periods ahead of third-quarter results.

The timing is awkward. Retail buying typically weakens in September, systematic investors have rebuilt exposure, and Treasury yields are again challenging equity valuations.

Wall Street’s corporate buying machine is about to slow

Corporate buybacks matter because companies repurchasing their own shares provide steady demand that is less sensitive to daily market swings.

Citadel Securities said more than $1.1 trillion of announced buyback authorisations had returned to open windows by August 27.

Importantly, 67% of the largest authorised programmes this year came from outside technology, showing support extended beyond Big Tech.

That cushion will shrink through September.

Citadel strategist Scott Rubner said blackout periods begin accelerating around September 12, meaning “one of the market’s largest and most consistent sources of structural demand” becomes progressively smaller as the month advances.

Companies do not become sellers during blackout periods. They simply stop providing some incremental buying that has helped absorb weakness.

Citadel also found average retail net buying on S&P 500 down days in September has historically been roughly half the all-month average since 2019.

Even the buyback boom underneath the market is changing

Corporate America is still returning enormous amounts of money to shareholders, but the composition is shifting.

Neuberger Berman said S&P 500 companies repurchased a record $1.10 trillion of stock during the 12 months through June.

The biggest AI capital spenders cut buybacks 32% to $85 billion as data-centre spending increased. Financial companies moved the other way, lifting repurchases to a record $287 billion.

Neuberger Berman associate portfolio manager Rebekah McMillan said the “marginal buyer of US equities is now more cyclical and more credit-sensitive.”

That distinction matters as buybacks funded by hyperscalers with enormous free cash flow can be relatively dependable. Bank repurchases are more exposed to earnings, credit losses, regulation and capital requirements.

Neuberger also said the tailwind from shrinking share counts is fading among some of the largest index constituents, even as buyback support broadens down the market.

Higher Treasury yields make the timing more uncomfortable

The blackout period would matter less if the macro backdrop were calm.

Instead, the 10-year Treasury yield recently moved towards 4.8% as investors weighed inflation, higher oil prices and renewed expectations for tighter Federal Reserve policy.

Evercore ISI strategist Julian Emanuel told Barron’s that a 10-year yield of 4.75% or higher has historically been “noxious to stocks” during the current bull market, prompting a defensive near-term stance.

The earnings season that powered the summer rally is fading. Corporate buybacks are becoming less available, retail dip-buying is seasonally weaker and much of the systematic buying capacity rebuilt after July’s sell-off has been deployed.

None of those factors guarantees a correction, but together they mean the market may have fewer automatic buyers if another macro surprise triggers selling.

The post Wall Street is about to lose a $1.1 trillion buyer: why stocks could get bumpier appeared first on Invezz