FedEx stock is down more than 20% following CEO warning of recession
Damian J. Troise
Stocks fell broadly in afternoon trading on Wall Street Friday, putting the market on track for another week of sizable losses.
The latest discouraging news for traders came from corporate giants FedEx and General Electric, which warned about worsening trends in the economy hurting business.
The S&P 500 fell 1.2% as of 12:01 p.m. Eastern. The benchmark index is down 5.2% for the week, with much of the loss coming from a rout on Tuesday following a surprisingly hot report on inflation.
The Dow Jones Industrial Average fell 293 points, or 1%, to 30,672 and the Nasdaq fell 1.4%. Both indexes are also on track for steep weekly losses.
Technology stocks, retailers and industrial companies had some of the biggest losses.
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FedEx stock
Package delivery service FedEx fell 22.8% and is on track for its biggest single-day sell-off on record after warning investors that profits for its fiscal first-quarter will likely fall short of forecasts because of a dropoff in business. It is also shuttering storefronts and corporate offices and expects business conditions to further weaken.
Industrial giant General Electric fell 5.2% after its chief financial officer said it was still bogged down by supply chain problems that were raising costs.
Utilities and makers of household goods, which are typically considered less risky investments, held up better than the rest of the market.
The worrisome corporate updates hit a market already on edge because of stubbornly high inflation as well as the higher interest rates being used to fight it, which will slow the economy.
Next rate hike
The Federal Reserve is aggressively raising interest rates in an effort to cool the hottest inflation in four decades, but that has raised worries that it could hit the brakes too hard and slide the economy into a recession. The central bank has already raised interest rates four times this year and economists expect another jumbo increase of three-quarters of a point when the Fed’s leaders meet next week.
Higher interest rates tend to weigh on stocks, especially the pricier technology sector. Technology stocks within the S&P 500 are down more than 25% for the year and communications companies have shed nearly 35%. They are the worst performing sectors within the benchmark index so far this year.
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The housing sector is also hurting as interest rates rise. Average long-term U.S. mortgage rates climbed over 6% this week for the first time since the housing crash of 2008. The higher rates could make an already tight housing market even more expensive for homebuyers.
The Fed’s rate hikes have seemingly done little to cool inflation. Reports this week from the government showed that prices for just about everything but gas are still rising, the job market is still red-hot and consumers continue to spend, all of which give ammunition to Fed officials who say the economy can tolerate more rate hikes.
Bond yields rose. The yield on the two-year Treasury, which tends to track actions by the Fed, rose to 3.87% from 3.86% late Thursday. The yield on the 10-year Treasury, which helps dictate where mortgages and rates for other loans are heading, rose to 3.46% from 3.45% late Thursday.
