U.S. stocks recorded another day of gains -- that's now seven up days over the past eight sessions -- as the S&P 500 (SNPINDEX:^GSPC) and the Dow Jones Industrial Average (DJINDICES:^DJI) rose 0.25% and 0.14%. That pushed the S&P 500 up to another all-time high closing price.
Consistent with those gains, the VIX (VOLATILITYINDICES:^VIX), Wall Street's fear gauge, rose today by 1%, to close at 13.71. (The VIX is calculated from S&P 500 option prices and reflects investor expectations for stock market volatility over the coming 30 days.)
Apple is back on top
As the Federal Reserve's monetary policy meeting got under way today, technology stocks led the broad market -- by a wide margin -- as the S&P 500's information technology sector increased 1.2%. (The runner-up, telecommunication services, managed only a 0.4% return.) Information technology was also the best-performing sector yesterday. The largest driver of those gains were shares of Apple (NASDAQ:AAPL), which were up 2.9% today, for a 6.1% return on the week thus far. That two-day return has added $32.3 billion to the company's market capitalization, enough to wrest the title of most valuable company in the world back from ExxonMobil.
The catalyst for today's price appreciation was the news that Apple was setting another record with a jumbo $17 billion global bond issue. The proceeds of that bond will finance the company's aggressive new capital return program that calls for a dividend increase and the largest share repurchase plan in history, at $60 billion. These initiatives were already announced a week ago during Apple's first-quarter earnings announcement, but actions speak louder than words in the marketplace. The demand for the bond, which hit $50 billion this afternoon, will also have contributed to the shares' buoyant reaction.
In many cases, companies would be better off ignoring Wall Street's siren song regarding financial engineering, but in Apple's case, issuing debt to buy back shares is a rational course of action that creates value for shareholders, both short- and long-term. Indeed, the cost of debt for blue-chip corporates is at historic lows (thanks, Mr. Bernanke!), and the shares appear undervalued. Furthermore, the resulting amount of leverage is negligible, and Apple will still have plenty of cash to cover its operating needs. Those ingredients are the recipe for a successful capital return program; no wonder investors have sweetened to the shares.
Fool contributor Alex Dumortier, CFA, has no position in any stocks mentioned; you can follow him on LinkedIn. The Motley Fool recommends and owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.