Citi: The Death of U.S. Capital Spending Has Been Greatly Exaggerated

Corporate America's perceived reluctance to spend much on anything other than its own shares has been a boon for the stock market but is often cited as a drag on real economic activity. However a new report from Citigroup casts doubt on that assertion.

An extended period of near-zero interest rates has made it cheaper for Standard & Poor's 500-stock index companies to issue cheap debt, which they have used to repurchase roughly $2 trillion of their own stock, on net. Reducing the amount of shares outstanding—the denominator in the earnings-per-share equation that is closely tracked by analysts and investors—has the effect of boosting the bottom- line results, assuming no change in the earnings numerator.