Executives aren't buying their company's shares after market correction

  • Vickers' overall Insider Index, a measure of insider buying by corporate executives, went negative this week for the first time since August 2017.
  • "Insiders are clearly in a cautious mood as stock prices have quickly recovered ground in what many felt was a healthy and needed correction. Indeed, all the major insider sentiment barometers tracked by Vickers have moved in a bearish manner," Argus Research analyst and quantitative portfolio strategist David Coleman writes.

Corporate executives aren't using their own personal funds on average to buy their company's stock during the market swoon, according to a research firm.

Companies have bought back $113.4 billion of their own shares this month, good for the highest total since April 2015, according to market data firm TrimTabs.

In contrast, Argus Research said its Vickers' overall Insider Index, a measure of insider buying by corporate executives, went negative this week for the first time since August 2017.

"Insiders are clearly in a cautious mood as stock prices have quickly recovered ground in what many felt was a healthy and needed correction. Indeed, all the major insider sentiment barometers tracked by Vickers have moved in a bearish manner," Argus Research analyst and quantitative portfolio strategist David Coleman wrote in the firm's "Vickers Weekly Insider" report Monday.

Coleman noted the number of insider sales transactions rose 28 percent in the past week versus the previous week, while the number of insider purchases fell by 34 percent in the same time period.

The S&P 500 fell officially into correction territory in early February, down more than 10 percent from its record reached in January. But the benchmark has come roaring back, in part boosted by corporate stock buybacks. The major averages are less than 4 percent from their old highs.

Traders blamed the sell-off on increasing worries about rising inflation and the prospect for a faster pace of interest rate hikes by the Federal Reserve. The U.S. 10-year Treasury yield, which moves inversely to bond prices, had climbed to a four-year high of 2.95 percent earlier in the month after the strong January jobs report.

Coleman said the market correction may not be over because of stock valuations.

"The main reason to worry that stocks are not yet done correcting is that, even after the pullback, the stock market is far from cheap," he wrote. "The days of indiscriminate gains, and the complacency that environment bred, is a thing of the past."

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