Microsoft Announces Record $60 Billion Buyback Just As Market Was About To Break Key Support

It was just last Thursday when, commenting on the record flood of corporate bond issuance to hit investment grade companies, which hit an all-time post Labor day high of $60.6BN in new issues across a record (for any two-day period) 39 deals (the previous two-day record was 36 deals immediately after Labor Day in 2019) we said that “while much of tens of billions in proceeds will be used to refi existing debt, we expect a good portion to stay as “general corporate purposes”, i.e., used as dry powder to repurchase stocks. Which means brace for a tidal wave of buybacks in the coming days.“

We had to wait just three trading days for this prediction to come true because shortly after the close on Tuesday, Microsoft which is the second most valuable company in the world after Apple with a market cap of just over $2.2 trillion, announced that its board approved a new share repurchase program authorizing up to $60 billion in share repurchases. The new share repurchase program represents 2.7% of MSFT’s entire market cap and comes exactly two years after the company’s last buyback authorization which was $40 billion.

In short, it is precisely the kind of buyback tsunami we had expected would arrive just days after the biggest bond offering onslaught in history.

But there’s more, because while MSFT stock is up about 1% on this news alone and set to hit a new all time high in the next few days making the MSFT board extremely rich(er), the record repurchase could not have come at a more critical time for stocks: with Apple crapping the bed, and tumbling on its dismal iPhone 13 launch date, it had dragged the S&P just above the critical 50 DMA support level. And just when the market despertely need a boost, here comes Microsoft.

Come to think of it, this is precisely what happened in mid-August, when just as the ES was about to drop below the even more critical 4,350 support level, banks unleashed a record round of buybacks according to BofA.

And so, two birds with one buyback: MSFT stock is back to just shy of all time highs, and the S&P has been rescued, with the downward momentum from the recent selling solidly supported now that traders know that the tech giants will boldly step in with tens of billions in buybacks to prop up the “market.”