Stock buybacks could rebound this earnings season

American companies could start buying up more of their own shares as rising profits generate surplus cash and interest rate cuts come into view.

A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link. American companies could start buying up more of their own shares as rising profits generate surplus cash and interest rate cuts come into view. Stock buybacks struggled to recover last year after taking a hit in 2022, even as corporate earnings began to rebound. Strategists at Deutsche Bank predict that could change soon, but even at their current subdued pace, buybacks should help drive 7% to 8% annual returns in the S&P 500 index. Investors view buybacks as an indication that a company’s leadership believes its own shares are undervalued and are confident about its future performance. Buybacks also tend to push up share prices due to the added demand. When the Federal Reserve’s interest rate hikes in 2022 clobbered the stock market and corporate earnings, S&P 500 company buybacks also fell from about $300 billion in the first quarter to $200 billion by the fourth quarter, according to Deutsche Bank. About three weeks into 2024, some firms have already announced plans to buy back their shares. Home construction firm Lennar on January 9 raised its share buyback by $5 billion. ONEOK, a natural gas company, on Wednesday unveiled a $2 billion share repurchase program.