This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Market Preview: Beware Corporate Sellouts

NEW YORK ( TheStreet) -- U.S. stocks have started the week with a nice vote of confidence but the terrain gets tougher from here.

Eighty S&P 500 companies are due to report before the closing bell sounds on Friday. The early reviews on the third quarter are worse than expected but it's easy enough to brush that off to small sample size. Over the next few days, the picture will clear up and nervous investors holding healthy profits for 2012 overall may decide to cut back on their equity exposure.

What's worth considering is that there's some evidence corporations have already started bailing out. Over the weekend, research firm TrimTabs noted that corporate selling, measured by new offerings and net insider selling, has totaled $12.4 billion so far in October vs. corporate buying (new cash takeovers plus announced buybacks) of $8.5 billion.

That's not a huge gap (and it doesn't factor in the Sprint (S)/ Softbank deal) but there's more of a disparity going back to the start of September, when the tally is corporate selling of $62.7 billion vs. corporate buying of $34.5 billion, a $28.2 billion difference.

"Given the lofty valuations at which the overall U.S. stock market trades, we can hardly blame corporate America for ramping up its selling," the firm wrote.

The trend is especially concerning if the impact of buybacks on helping the major indices return to multi-year highs is factored in.

Sean Darby, chief global equity strategist at Jefferies, cited S&P data Monday saying S&P 500 constituents conducted $111.7 billion in buybacks in the second quarter, up from $84.3 billion in the first quarter.

"[T]he unintended consequences of the reluctance of companies to invest in new capex but hoard cash at close to 1945 record levels is to buyback shares," he said. "Aside from low real interest rates, one of the main reasons why the US equity market has held up well is due to the squeeze on the stock free-float. Indeed, stock repurchases have offset stock withdrawals by households during the past six months."
1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
GS $160.53 -3.40%
INTC $29.79 -2.70%
ISRG $613.50 -3.10%
IBM $143.90 -0.94%
KO $44.66 -0.71%


Chart of I:DJI
DOW 17,628.94 -121.97 -0.69%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs