Stocks plummet in wake of FedEx earnings warning
Stocks fell on Friday morning, deepening the sell-off in US stock markets that put the three major averages on the weekly losing pace. The moves came as traders weigh an ominous warning from FedEx about the global economy.
The S&P 500 fell 1.2% in early trading as the Dow Jones Industrial Average shed 350 points, or 1.1%. The high-tech Nasdaq Composite led the losses, falling 1.6%.
FedEx (FDX) withdrew its full-year guidance late Thursday and sent messages about earnings expectations that drove the stock higher. Shares are down more than 20% at the start of Friday’s session.
“Global volumes declined as macroeconomic trends deteriorated significantly later in the quarter, both internationally and in the US,” FedEx CEO Raj Subramaniam said in an earnings statement. “We are quickly dealing with these headwinds, but given how quickly conditions have changed, first-quarter results are below our expectations.”
With the start of the third-quarter reporting season, a number of strategists became nervous about their earnings outlook and trimmed their forecasts.
According to data from FactSet Research, earnings growth forecasts for the S&P 500 stand at a 3.7% increase for the third quarter, down sharply from the 9.8% growth forecast at the end of June.
Analysts have lowered third-quarter earnings forecasts for the past 2-3 months for every S&P 500 sector except energy, and seven of the 11 sectors in the index are now expected to show an outright decline in earnings year-over-year, compared to just three in the second quarter.
While the first half of the year was shaped by inflationary pressures and hawkish Federal Reserve policy, the rest will be fueled by slower growth and weak earnings, said Michael Wilson, chief US equity strategist at Morgan Stanley.
“While we acknowledge the underperformance in stocks year-to-date, we don’t believe the bear market is over if our earnings expectations are correct,” Wilson said in a recent note to clients.
In the bond market, the benchmark 10-year US Treasury held above 3.46%, while the policy-sensitive two-year Treasury rose, reaching 3.9%, the highest level since 2007.
Oil prices rose slightly on Friday morning but the commodity was on its way to a third week of declines.
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter Tweet embed
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