U.S. businesses took a pause from repurchasing their own shares—also known as stock buybacks—in the first quarter of 2014, according to the U.S.-focused research tracker TrimTabs, which now believes surging stock markets might have a tough time pushing even higher.
"Corporate actions have turned less supportive of stock prices," TrimTabs Chief Executive David Santschi said in a research note on Sunday. "The decline in the volume of buybacks is a cautionary sign, as buyback volume and the S&P 500 have a high positive correlation."
Many of the corporate America's' biggest names have decided to buy back their own stock in recent years. These buybacks happen when firms buy their own shares trading on the stock exchange, reducing the portion of shares in the hands of investors. They offer a way to return cash to shareholders - along with dividends - and usually coincide with a company's stock pushing higher as shares get scarcer.
Many analysts see stock buybacks as being a key driver behind record highs for U.S. stock markets rather than any expansion in company earnings. In some cases, firms are borrowing cash to buy back their shares, thus taking advantage of ultra-low interest rates set by the U.S. Federal Reserve.