Big companies in many sectors are making big investments in things like real estate, equipment, and technology. The Wall Street Journal’s Hannah Miao reports on their growing capital expenditures, writing:
The biggest U.S. companies keep stepping up their spending on capital projects, an encouraging signal to investors in an uncertain economic climate.
Companies from Google parent Alphabet Inc . to General Motors Co. to PepsiCo Inc. are among those that have increased spending on big-ticket items, such as real estate, equipment or technology, to fuel growth. The investments are generally intended to expand the companies’ fast-growing operations or even optimize their inventory in the midst of a challenging business environment, according to executives.
Capital expenditures among companies in the S&P 500 have been growing at a faster pace than stock repurchases for the first time since the first quarter of 2021, according to data analyzed by S&P Dow Jones Indices from the second-quarter earnings season.
Based on results from roughly two-thirds of the companies in the index, capital expenditures have risen 20% from a year earlier to $149.8 billion, roughly in line with the first quarter’s growth rate. Meanwhile, share repurchases have climbed 10% to $160.8 billion and dividends have increased 14% to $140.6 billion.
The spending boom has offered a leg of support to a stock market that has been buffeted by worries about soaring inflation and the pace of the Federal Reserve’s campaign to raise interest rates. The S&P 500 has slumped 13% this year but has rebounded 13% from its low in mid-June.
“One reason that stocks haven’t absolutely fallen off a cliff right now is because of that increased capex,” said Ben Silverman, director of research at investment research firm VerityData. “There’s signaling from the executive suite that they’re comfortable spending money instead of hoarding cash.”
Read more here.