US DJIA index fell around 150 pips last week. The Bank of America Merrill Lynch downgraded its outlook on GDP and FED was worried that a recent lack of inflation was a sign the U.S. central bank would struggle to get price pressures back to its 2 percent objective.
Despite strong earnings and record levels of cash on balance sheets, big U.S. companies are spending less money on share repurchases. There were hopes that the slowdown in buybacks that began last year would pick up with the prospect of a tax overhaul in 2017. For the 12-month period ending March 2017, S&P 500 companies spent $508.1 billion on buybacks, down 13.8% from $589.4 billion for the prior 12-month period, which was all-time high.
Bank of America lowers US GDP outlook
Bank of America Merrill Lynch downgraded its outlook on U.S. gross domestic product in 2018 to 2.1 percent from an earlier forecast of 2.5 percent, according to the fading prospects on tax reform, policy uncertainty in Washington and weaker auto production. "Hopes for a big fiscal stimulus have faded, prompting us to remove most of the fiscal impulse from our forecast for growth next year," said Michelle Meyer, the firm's head of U.S. economics.
Growth remains stuck at 2 percent. It remains unlikely that the economic proposals of the Trump administration will raise that anytime soon, said St. Louis Fed President James Bullard. According to him, the policy proposals that survive Congress and have the potential to raise growth won't have an impact perhaps until 2019.
Chicago Federal Reserve Bank President Charles Evans on Tuesday became the latest to express worries on that front, saying he is concerned that a recent softness in inflation is a sign the U.S. central bank will struggle to get price pressures back to its 2 percent objective.