US stock futures drop as FedEx earnings warning deepens . gloom
Wall Street stock futures tumbled on Friday, leaving US stocks poised to close out the week with big losses after a profit warning from package delivery company FedEx magnified concerns about the economy.
S&P 500 futures fell 0.8 percent in the early morning in Chicago, with the more tech-focused Nasdaq 100 down 1 percent.
The declines came as shares in FedEx fell by a fifth in pre-market trading, in response to the group’s disclosure late Thursday that it would close offices, freeze hiring and ground planes in response to lower package shipping volumes.
The US company, seen as an economic leader due to its central role in global trade, released its preliminary quarterly financial results that were not what analysts had expected, while also withdrawing guidance for the rest of the fiscal year as it warned of deteriorating “macroeconomic trends”. in the United States and abroad.
European stock markets also reflected investors’ growing concerns about the health of the global economy. The regional Stoxx 600 index lost 1 per cent while the German DAX lost 1.6 per cent. In Asia, Hong Kong’s Hang Seng lost 0.9 percent and Japan’s Topix fell 0.6 percent.
The US S&P 500 index has already fallen 4 percent in the week to Thursday as traders fear the Federal Reserve will start raising interest rates more aggressively in its efforts to tame the worst inflation streak in four decades.
Trading in federal funds futures on Friday indicates that markets now expect the Fed to raise its key interest rate to 4.5 per cent by March next year, compared with expectations of around 4 per cent at the start of this week.
That would represent a sharp rise from the range of 2.25 to 2.5 percent now and from near zero at the start of 2022. High borrowing costs typically weigh on economic growth and some economists predict that the central bank may struggle to avoid flipping the world’s largest financing . The economy is in recession.
Hotter-than-expected August inflation data published on Tuesday, which showed a slight slower in the annual rate of consumer price growth than expected, shocked many economists who had expected lower gasoline prices to have a bigger impact on inflation. Concerns intensified on Thursday when weekly jobless claims data highlighted the continued strength of the US labor market.
“August is exceptionally strong [inflation reading] Diminished hopes of an imminent fall in inflation and raised the risk of higher inflation becoming more entrenched,” according to BNP Paribas. The French bank noted that the data opened the door to the possibility of a one percentage point rate hike when policymakers meet in Fed next week, an acceleration of two consecutive increases of 0.75 percentage points.
In currencies, the dollar rose against both the pound and the euro as traders looked to a major week for central bank news. In addition to the Federal Reserve, the Bank of England and the Bank of Japan are scheduled to make monetary policy decisions next week.