Shares plunge after FedEx profit warning

Shares plunge after FedEx profit warning

Shares plummeted Friday morning, reinforcing a sell-off in US stock markets, bringing all three major averages in line for a weekly loss. The moves came as traders weighed an ominous warning from FedEx about the global economy.

The S&P 500 fell 1.2% at the start of trading, while the Dow Jones Industrial Average lost 350 points, or 1.1%. The tech-heavy Nasdaq Composite took losses and plunged 1.6%.

FedEx (FDX) withdrew its full-year guidance late Thursday and delivered announcements about its earnings outlook, pushing the stock soaring over an extended trading period. At the start of Friday’s trading session, shares fell more than 20%.

“Global volumes declined as macroeconomic trends deteriorated significantly later in the quarter, both internationally and in the US,” FedEx chief executive Raj Subramaniam said in an earnings statement. “We are tackling these headwinds quickly, but given the speed with which conditions are shifting, Q1 results are below our expectations.”

With the third quarter reporting season on deck, a number of strategists have soured their earnings estimates and revised their forecasts.

According to data from FactSet Research, earnings growth expectations for the S&P 500 are up 3.7% for the third quarter, down sharply from the 9.8% growth forecast at the end of June.

Analysts have lowered third-quarter earnings expectations for every sector in the S&P 500 except energy for the past 2-3 months, and seven of the 11 sectors in the index are now expected to see year-over-year earnings declines, compared to only three in the second quarter.

Morning commuters walk on Wall St. as the Union Jack flies at half-mast outside the New York Stock Exchange (NYSE) in New York City, US, Sept. 9, 2022. REUTERS/Brendan McDermid

Morning commuters walk on Wall St. as the Union Jack flies at half-mast outside the New York Stock Exchange (NYSE) in New York City, US, Sept. 9, 2022. REUTERS/Brendan McDermid

Michael Wilson, chief US equity strategist at Morgan Stanley, an outspoken stock bearer, has said that while the first half of the year was dominated by inflationary pressures and aggressive Federal Reserve policies, the rest will be fueled by slowing growth and weak earnings. .

“We recognize the poor performance of stocks so far, but we don’t think the bear market is over if our earnings forecasts are correct,” Wilson said in a recent note to clients.

In the bond market, the US 10-year Treasury benchmark held above 3.46%, while the policy-sensitive 2-year Treasury peaked further, reaching 3.9%, its highest level since 2007.

Oil prices rose slightly Friday morning, but the commodity was on track for a third week of declines.

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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