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.
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.
Further Reading
Here’s What Happens To Stocks When The Fed Raises Rates By 100 Basis Points (Forbes)
