For the last several weeks, the main focus of investors has mainly been on big picture issues; central banks, the state of the economy, inflation, rising interest rates, the US Dollar, and commodity prices. Last night, investors received a stern reminder that these issues don’t just impact the overall market in terms of liquidity for trading, they also can have a big impact on corporate earnings.
After the market closed yesterday, FedEx (FDX) released a profit warning, a week ahead of its scheduled earnings report. Earnings per share, are expected to come in far below expectations ($3.44 vs street $5.14). EPS guidance for next quarter was also much worse than expected ($2.75 vs street $5.50) and the company pulled its full year guidance completely. Management blamed slowing volumes for the shortfall and indicated that they are seeing the potential for a worldwide recession ahead.
This news sent FedEx shares plunging in aftermarket trading. Premarket trading today finds FedEx down 20.7% and competitor United Parcel Service (UPS) down 6.3%. With the spotlight now turning to what a potential recession could mean for corporate earnings, US index futures are down 0.6% to 0.9%, while over in Europe, the Dax is down 1.7% and the FTSE is flat.
Recent economic news has been mixed. Yesterday the Atlanta Fed cut its GDPNow forecast for US GDP growth to 0.5% from 1.3%. This morning, Canada reported better than expected housing starts, which slowed less than feared (267K vs street 265K and previous 275K). Today in the US, the focus is on University of Michigan consumer sentiment due at 10:00 am EST (street 60.0) and associated expectations of future inflation, whether consumers are thinking inflation could come back down or remain high.
Chief Market Strategist Colin Cieszynski appeared on BNN Bloomberg today where he discussed tactical investing, sector rotation, relative strength and the Canadian Dollar.