US stocks have been falling for consecutive days, and the "reinforcements" have arrived!

On Wednesday, the three major US stock indexes fell during the trading session and are likely to close lower for the second consecutive day. The S&P and NASDAQ Composite Index are on track to record their sixth consecutive day of decline in the past seven trading days, while the Dow is set to record its fifth day of decline in the past six days. However, the US stock market may soon receive reinforcements as Goldman Sachs has noticed that the buyback window has officially reopened.

In her weekly report, Goldman Sachs trader Vani Ranganath wrote that it is expected that around 86% of the companies in the S&P 500 index are currently in an open buyback window. By the end of this week, this proportion is expected to rise to about 91%, which means that almost all of the constituent companies will be able to repurchase their stocks.

Data from Goldman Sachs' active fund flow at the corporate trading desk shows that as of last week, which ended on August 4th, the volume of corporate buybacks this year is 0.7 times the average daily trading volume (ADTV) since the beginning of last year, and 1.3 times the ADTV since the beginning of 2021. This year's buyback funds are mainly focused on the communication services, financial, and technology sectors.

Given the arrangement of the open buyback window for companies, Goldman Sachs predicts that buyback transactions this month will be more active, which is consistent with the monthly trading flow trend reflected in the historical records of Goldman Sachs' relevant trading desks.

Although interest rates are high, with the increase in buyback authorizations obtained by listed companies, the "ammunition" in the buyback pipeline has increased once again. According to Goldman Sachs' statistics, 32 buyback authorizations with a total scale of $13.5 billion were approved this week.

The following image shows some large-scale stock buyback authorization projects launched last week, as well as the corresponding buyback values.

The resurgence of buybacks may be one of the factors behind the reversal of the US stock market on Tuesday, as the market saw a narrowing of the decline in the afternoon.

John Flood, a partner and senior trader at Goldman Sachs, commented that on Tuesday, there was a reversal in spot prices and trading volumes, indicating that the market seemed to be engaged in long gamma trades, and the large fluctuations during the trading session subsided in the afternoon. The overall fund flow on Tuesday did not reflect the pursuit of volatility that we observed in pricing. In the morning of Tuesday, as volatility increased, some sellers closed their long positions in VIX call options, but we did not see a significant increase in demand for downside protection.

If it was not due to the impact of derivatives or zero-day-to-expiration (0DTE) trades, then the rebound on Tuesday may have been driven by busy corporate buybacks.

Goldman Sachs trader Peter Callahan expects repurchase prices in the entire market to rise, and registered stock issuances will continue to increase. He pointed out that Goldman Sachs has noticed a significant increase in repurchase trading volume this week, with trading funds currently 80% higher than the ADTV since the beginning of this year, with a focus on the technology, telecommunications services, and non-essential consumer goods sectors. In terms of issuances, stocks worth $3.6 billion were issued across various industries last week, reaching $2.5 billion this week.

Callahan concluded that the push-pull between corporate repurchases and issuances will have a net positive impact on large-cap technology stocks. This is because most repurchases are concentrated in these technology giants, such as Apple, which has been authorized for $90 billion in repurchases, Alphabet-C parent company Alphabet-C, Microsoft, and Meta, which have been authorized for $70 billion, $60 billion, and $40 billion respectively. On the other hand, potential fund flows are headwinds for mid-cap stocks, as most issuances are concentrated in mid-cap stocks.