Dow Down 100 Points As Rattled Investors Close Worst Week Since June

Topline

The stock market wrapped up a dismal week with a slight Friday dip, driven by a gloomy outlook from FedEx, as investors remain spooked by inflation data and rate hike expectations.

Stocks had their worst week since June.

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Key Facts

The Dow Jones Industrial Average fell .45%, or 140 points, recovering from a 400-point morning drop thanks to a late rally, while the S&P 500 dipped .68% and the tech-heavy Nasdaq Composite dropped .88%.

The Dow closed at a two-month low and fell more than 1,300 points this week, or 4.2%, in the index’s worst week since the first week of June.

The tumble was largely thanks to FedEx, which fell 21.4% to $161.02 after the company missed profit and sales estimates and withdrew its full-year forecast thanks to dampening demand.

FedEx shares are down nearly 50% from its May 2021 high of $314.81.

FedEx’s drop trickled over into competitors, with UPS and XPO Logistics shares each down 4.7%.

The drop this week largely came Tuesday, when the Dow, S&P and Nasdaq all suffered their worst day of 2022 after the Labor Department’s red-hot August inflation report.

Surprising Fact

This is the sixth straight week that the S&P 500 has moved by more than 1%, the second-longest such streak in at least 70 years, according to Bespoke Investment Group. The longest such stretch occurred from March 2020 to May 2020, when the index moved more than 1% for 10 straight weeks during the early days of the Covid-19 pandemic.

Key Background

In its quarterly earnings report after Thursday’s market close, FedEx announced significant cost-cutting measures in response to “lagged” global shipping volumes caused by poor macroeconomic conditions. Asked by CNBC if he sees his company’s stagnation as a sign of a global recession, FedEx CEO Raj Subramaniam said, “I think so,” explaining the numbers “don’t portend very well.”

Crucial Quote

Ipek Ozkardeskaya, a senior analyst at Swissquote, told Bloomberg: “The FedEx warning came as a slap. It’s a solid sign that the economy started slowing.”

Contra

Edward Moya, a senior market analyst at OANDA, indicated in a note to clients that the market may have overreacted to the FedEx guidance, writing, “FedEx might have a couple tough quarters ahead of it, but this should not be the story that indicates doom and gloom times are here to stay.”

What To Watch For

Analysts increasingly see a 100 basis-point rate hike from the Federal Reserve as a possibility. The Fed hasn’t raised rates by that much in more than 40 years, and the S&P 500 fell by an average of 2.4% one month after the Fed’s seven 100-basis-point rate hikes between 1978 and 1981, according to CFRA Research.