The market trended higher on Friday, to finalize a busy week of company earnings and economic reports. The Dow Jones Industrial Average jumped 1%, or about 400 points, while the S&P 500 rose 1.1% and the Nasdaq Composite increased 1.8%. All three indexes are set to close a sharp weekly gain, heavily attributed to Apple's (AAPL) after-hours earnings beat and share buy-back program announcement on Thursday. Amazon also reported earnings earlier this week, beating analysts expectations on every metric which sent the stock up to almost 5% after-hours. The Federal Reserve hosted their Federal Open Market Committee (FOMC) two-day meeting, which concluded on Wednesday with the decision to leave interest rate unchanged due to the lack of progress on inflation. The April jobs report signaled a cooling U.S. labor market, as employers added 175,000 jobs and the unemployment rate unexpectedly jumped to 3.9%. Economists had expected an addition of 240,000 jobs and unemployment rate to remain at 3.8%. Wage figures also came in less than expected, an encouraging sign for inflation and increasing hopes that the Federal Reserve could start cutting interest rates soon.
What is a share buy-back program?
A share buyback program, also known as a stock repurchase program, is when a company repurchases its own shares from the open market. By using its available funds to buy back a certain number of outstanding shares, the company aims to reduce its total number of outstanding shares. This can lead to concentrated ownership for existing shareholders, potentially increasing the value of the remaining outstanding shares. Additionally, share buybacks can improve earnings per share (EPS) by dividing the same earnings among fewer shares, signaling enhanced financial performance to investors. While share buybacks can be a tax-efficient way for companies to deploy surplus cash and manage their capital structure, critics argue that they may be misused to artificially boost stock prices and benefit executives with stock options.