Topline
Markets opened down Friday, driven by a gloomy outlook from FedEx, as investors remain spooked by inflation data and rate hike expectations.
FedEx shares fell about 20% early Friday.
Key Facts
The Dow Jones Industrial Average fell 1%, more than 300 points, while the S&P 500 dipped 1.34% and the tech-heavy Nasdaq Composite dropped 1.78%.
The tumble was largely thanks to FedEx, which fell 23.2% to $157.35 after the company missed profit and sales estimates and withdrew its full-year forecast thanks to dampening demand.
FedEx shares are down 50% from its May 2021 high of $314.81.
FedEx’s drop trickled over into competitors, with UPS and XPO Logistics shares down 5.7% and 7.4%, respectively.
The Dow is down more than 1,500 points this week, or 4.7%, on pace for its worst week in months.
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.
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.”
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.”
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.
Further Reading
Here’s What Happens To Stocks When The Fed Raises Rates By 100 Basis Points (Forbes)
Source: https://www.forbes.com/sites/dereksaul/2022/09/16/dow-down-400-points-as-rattled-investors-look-to-close-gloomy-week-fedex-falls-24/