U.S. markets continued to trade higher as the Dow gained 39 more points, closing at 25,502, while the Shanghai Index lost another 1.25%. The trade tiff continues as China is considering imposing tariffs on $60 billion of U.S. imports. Out of the other eye, Washington is keeping track of sanctions with Iran and asking EU countries to limit their amount of energy imports from them. Crude oil saw a tick up today and is now at $68.82 per barrel.
U.S. markets have seen gains as a result of strong earnings from companies, and those companies are taking the excess cash flows and pouring it into stock buybacks. Goldman Sachs predicts that share buybacks could set a record and eclipse $1 trillion – or one Apple. Of course Apple has been one of the big contributors to buybacks, as tech and healthcare have been the biggest repurchasers. Share buybacks have the effect of reducing the number of shares and thereby increasing their earnings per share. It also helps to diminish the amount of cash that a company will has to distribute in order to meet their dividend payment.
Facebook saw a 4.5% gain today as it looks to partner with banks so customers can communicate with their bank via Facebook Messenger. This would clearly be a big deal for Facebook’s business but it also has people naturally nervous as they need to collect financial information in order for these communications to take place. Given Facebook’s recent data privacy debacle, it will be interesting to see if these partnerships happen and with whom. Currently there are already credit card companies that allow this type of communication. Of course Facebook recognizes the concern, and is assuring their customers that this will be an “opt in” function.
One Fund getting rid of Facebook is the Technology Sector SPDR Fund (XLK). Not because they don’t like the stock anymore as this is a passively invested ETF, but because S&P has decided to reorganize three of their sectors. The Technology Sector Fund will be moving Facebook, Google, Activision, Electronic Arts, and Take Two to the Comm Services ETF (XLC). Also going to XLC are Disney and Comcast from the Consumer Discretionary Select SPDR (XLY). This is all set to take place September 21.