Good Evening. Equities fell on Tuesday as investors weighed hawkish statements by Federal Reserve Governor Lael Brainard. Brainard signaled policymakers were ready to intervene more aggressively to reign in inflation. Investors were also keeping an eye on news the United States and the European Union were planning to announce further sanctions against Russia on Wednesday.
After two straight trading sessions of gains, the S&P 500 fell 1.26%, while the Dow Jones Industrial Average fell 0.80%. The Nasdaq fell 2.26%, the most in three weeks. The market giveth and the market taketh away.
SHARE BUYBACK PROGRAM
Starbucks’ three-year, $20 billion share buyback program was suspended less than six months after it was unveiled. Howard Schultz, the company’s temporary CEO, claims icing the program will free up funds to reinvest in the company’s stores and staff.
Share buybacks 101: A share buyback is when a firm buys back its own stock. Buybacks reward current shareholders and are often used in addition to, or in lieu of, dividends. Labor organizations, the SEC, and even President Biden, who advocated stronger stock repurchase laws for company executives this week, have all criticized the practice. That hasn’t slowed down the buybacks…
- According to Goldman Sachs, stock buybacks from S&P 500 corporations are anticipated to surpass $1 trillion this year. The previous record was set way back in 2021 with total purchases of $882 billion.
- Starbucks has spent $13.5 billion on stock repurchases in previous years.
Reading the coffee grounds: This is Schultz’s third term as CEO of Starbucks, but he’s dealing with inflationary pressures, stagnation in China (the company’s largest overseas market), and the company’s most strong unionization push in its history.
BOND PRESSURE
In an effort to put pressure on Russia, the US has made it harder for Russia to pay its creditors. The US has barred the Russian government from paying holders of its sovereign debt more than $600 million from reserves held by US banks on Monday.
As part of the sanctions imposed on Moscow, the Russian central bank’s foreign currency holdings at U.S. financial institutions were blocked on February 24.
On a case-by-case basis, the US Treasury Department had been allowing the Russian government to use cash to make coupon payments on dollar-denominated sovereign debt.
As a $552.4 million principal payment on a maturing bond became due on Monday, the US administration proceeded to shut off Moscow’s access to the frozen money.