September 30, 2022
FedEx warning scares investors, Dow falls

Stocks ended in the red on Friday, falling to a two-month low as warnings of an imminent global recession from FedEx intensified investors’ flight to safety over a weekend.

All three major US stock indexes slipped to a level of a closely watched support level since mid-July, with the S&P 500 closing below 3,900.

The Dow Jones Industrial Average fell 139.4 points, or 0.5%, to 30,822.42, the S&P 500 fell 28.02 points, or 0.7%, to 3,873.33, and the Nasdaq Composite fell 103.95 points, or 0.9%, to 11,448.40.

The S&P 500 and the Nasdaq suffered their worst weekly percentage declines since June, shunning a week’s end, buoyed by inflation concerns, rising interest rates and ominous economic warning signs.

“It’s been a tough week. It looks like Halloween has quickly arrived,” said David Carter, managing director of JPMorgan in New York. “We are facing this toxic booze of high inflation, high interest rates and low growth , which is not good for the stock or bond markets.”

Risk-off sentiment came to a boil in the wake of FedEx withdrew its earnings forecast late Thursday, citing signs of slowing global demand.

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Profit warnings from global delivery bellwether FedEx scared investors.

FedEx’s move followed comments from the World Bank and the IMF, both of which warned of an imminent worldwide economic slowdown.

A flood of mixed economic data, dominated by a higher-than-expected inflation report (CPI), cemented an interest rate hike of at least 75 basis points at the conclusion of the Fed’s monetary policy meeting next week.

“Markets are expecting a major Fed rate hike next week, but there is tremendous uncertainty and concern about future rate hikes,” Carter said. “The Fed is doing what it needs to do. And after some pain the market and the economy will automatically recover.”

Financial markets on Wednesday priced an 18% chance of a super-sized, 100 basis point increase in the fed funds target rate, according to the CME’s FedWatch tool.

FedEx shares fell 21%, the biggest drop in the S&P 500.

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Adding to the gloomy mood, the World Bank projected that the global economy is headed for a recession.

Pierce United Parcel Service and XPO Logistics slipped 4.5% and 4.7%, respectively, while Amazon slipped 2.1%.

The session also marked monthly option expiration, which occurs on the third Friday of every month. Options-hedging activity has exacerbated market movements this year, adding to volatility.

The CBOE Market Volatility Index, often referred to as the “fear index”, touched a two-month high, well above levels linked to increased investor anxiety.

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