Investors will be keeping a close eye on rising costs as the Q3 earnings season kicks off this week. Price pressures could pose a problem for corporate profits in the current quarter and beyond, with the S&P 500 already down 3.2% from its September record. Supply chain bottlenecks, labor problems and outsized demand are all leading to shortages, while a jump in raw material costs is pressuring companies' bottom lines. Analysts expect that earnings from S&P 500 companies grew 29.6% in the third quarter from a year earlier.
Companies have announced record levels of share buybacks as confidence recovers after a lull at the height of the coronavirus pandemic. Businesses have authorized more than $870bn of repurchases so far this year, Goldman Sachs data show, almost three times more than in the same period in 2020 and $50bn ahead of the record set in the first nine months of 2018. The rebound suggests that corporate America is now flush with cash and looking for ways to use it, after cutting payouts last year to hoard funds and protect against the risk of a more severe downturn.
More than 130 countries have signed up to a groundbreaking global deal on corporate tax reform aimed at eliminating tax havens while bringing in $150bn more a year from multinationals. The agreement — the biggest corporate tax reform for more than a century orchestrated by the OECD — includes a 15 per cent global minimum effective corporate tax rate, plus new rules to force the world’s multinationals to declare profits and pay more in the countries where they do business.