Companies announced $1.1 billion of repurchases a day on average during the earnings season in April and May, the lowest level since mid-2009, according to data compiled by Bloomberg and TrimTabs Investment Research Inc. Capital spending in the U.S. has risen since 2010 and reached $63.6 billion in March. Devon Energy Corp. eliminated buybacks and boosted exploration and production spending 18 percent. United Parcel Service Inc. cut repurchases in order to buy TNT Express NV.

After the biggest first-quarter gain for the Standard & Poor’s 500 Index since 1998, bears say the 58 percent decline in buybacks removes key support for equities amid Europe’s debt crisis and a weakening U.S. recovery. While orders for capital equipment fell last month, bulls say the two-year gain in business investment shows CEOs are growing more optimistic, spending to raise profits instead of reducing stock to boost per-share earnings.

“Investors and corporations themselves are best served when the cash is applied to improving capital investment, as opposed to buying stock back,” Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird & Co., which oversees $85 billion, said in a May 22 phone interview. “That would be much more bullish.”

Monthly Losses

The S&P 500 has retreated 7.1 percent since its April peak, leaving the valuation at 13.3 times annual earnings, 19 percent below the average multiple of 16.4 since 1954, Bloomberg data show. The index is poised for its first back-to-back monthly losses since September amid concern that global economic growth is slowing and Greece may leave the euro.

The benchmark gauge for U.S. equities advanced 1.7 percent to 1,317.82 between May 18 and May 25, breaking a three-week losing streak, after valuations dropped to the lowest level since November. Futures on the S&P 500 climbed 1 percent to 1,327.5 at 8:22 a.m. in London today.

Companies purchased about $708 billion of shares in 2010 and 2011 as $1.27 trillion was added to U.S. equity values, according to S&P and Bloomberg data. The buybacks coincided with the rally that has lifted the S&P 500 by 95 percent since March 2009. The spending helped buoy stocks as investors pulled $167 billion from U.S. equity mutual funds, data from Washington- based trade group Investment Company Institute show.

Buybacks Drop

Announced buybacks slipped to $21.7 billion in April and $6.1 billion this month, on pace for the lowest level since September 2009, according to Sausalito, California-based TrimTabs. During the earnings season a year earlier, buybacks averaged $2.6 billion a day, the data show.

JPMorgan Chase & Co., the biggest U.S. bank by assets, suspended its $15 billion program after at least $2 billion in losses related to wrong-way bets on illiquid credit derivatives.

As buybacks diminished, companies continued to return cash through dividends, keeping the payout yield on the S&P 500 near its decade average of about 2 percent. The slowdown in repurchases removes some of the biggest buyers from the market, said Chris Hyzy, who helps oversee about $325 billion as chief investment officer of U.S. Trust.

“The demand to own shares is dropping,” Hyzy said in a May 23 phone interview from New York. “The ability to stabilize the market at a time when the retail investor and other investors aren’t fully in is limited.”

Devon Spending

Devon, the third-largest U.S. independent oil and natural- gas producer, plans no buybacks as it boosts exploration and production spending to as much as $6.5 billion this year.

“We’re going to take a breather for the time being on share buybacks,” Chief Executive Officer John Richels of the Oklahoma City-based company told analysts on an April 4 conference call. “We have enough confidence, and we’re bullish enough about these opportunities in our opportunity set, that we just see that as a better allocation of that capital.”

UPS, the world’s biggest package-delivery company, this month reduced its planned buybacks for this year to $1.5 billion from $2.7 billion, reserving cash for its acquisition of TNT, the biggest purchase in the Atlanta-based company’s 105-year history.

“You would want to view buybacks in the context of the other major uses of corporate cash,” Thomas O’Halloran, a Jersey City, New Jersey-based money manager at Lord Abbett & Co., which oversaw about $110.4 billion as of Dec. 31, said in a May 23 interview. “When these are factored in, the corporate behavior is probably neutral to bullish.”

Record Cash

S&P 500 companies outside the financial and utilities industries increased cash holdings to a record $1.03 trillion at the end of 2011 after 13 straight quarters of beating analysts’ earnings estimates, according to S&P. Capital expenditures rose 38 percent from June 2010 through the end of the first quarter, the fastest rate since June 2006, when stocks were in the middle of a five-year bull market, data compiled by Bloomberg show.

Freeport-McMoRan Copper & Gold Inc., the world’s biggest publicly traded copper miner, raised its forecast in April for capital spending to about $4.3 billion from $4 billion in January. Earnings beat estimates for a 15th straight quarter as production dropped less than forecast for the first three months of 2012, the Phoenix-based company said.

Intel Investment

Intel Corp., based in Santa Clara, California, has boosted investment for the past eight quarters to a record $2.97 billion, with analysts estimating that spending will surpass $3 billion this quarter, as the chipmaker overhauls older plants and builds new ones, according to data compiled by Bloomberg. Chief Financial Officer Stacy Smith said this month that Intel expects gross margin, a measure of profitability, to be at the high end of its historical range next year.

The U.S. economy expanded 2.2 percent last quarter. The average quarterly rate of 2.4 percent since June 2009 is the slowest for a post-recession recovery period since World War II, Bloomberg data show.

Orders for computers, machinery and other non-military equipment dropped 1.9 percent in April, decreasing for a second month, data from the Commerce Department showed last week. Economists forecast a gain of 0.8 percent, according to the median of 49 estimates in a Bloomberg survey.

Jason Brady, a managing director at Thornburg Investment Management in Santa Fe, New Mexico, said the U.S. economy is expanding slowly enough that the European debt crisis has the potential to cause a recession.

Business Prospects

“How long is it going to look like that?” Brady, who helps oversee about $76 billion at Thornburg, said in a May 24 phone interview. “If the prospects for businesses generally are less good, slower economic growth, slower global growth, then investing in those businesses is far less helpful.”

Companies such as NetApp Inc., which sells hardware and software for storing data, have yet to benefit from a boost in spending as waning demand for their products and services translates into lower returns. The Sunnyvale, California-based company last week forecast first-quarter earnings that trailed analyst estimates, citing increasing uncertainty about the economic environment.

Dell Inc. CEO Michael Dell said revenue will miss estimates for the period ending in July as he’s seeing a “delay and pause in spending activity” by larger customers. Cisco Systems Inc. CEO John Chambers also said earlier this month that a decline in orders from big companies hurt fourth-quarter sales projections.

‘Growth Opportunities’

To Pioneer Investments’ John Carey, the slower-than-average expansion is a benefit for CEOs because they can increase capital spending at a steady pace, enabling a broader expansion for the economy over a longer period.

“Companies are now seeing some attractive growth opportunities for the long term,” Carey, who helps oversee about $220 billion at Pioneer in Boston, said in a telephone interview on May 23. “The more moderate growth rate means that companies don’t have to feel quite as pressured to hire lots of people and build lots of new plant right away, they can take their time and plan in a more deliberate way.”

“That’s a positive for creating conditions for a more sustained kind of recovery,” he said.