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In terms of volume, today was the biggest day for economic data in recent memory. Clearly, Tuesday’s Consumer Price Index (CPI) report, which sent the markets screaming downward — including a nearly 1300-point nosedive on the blue-chip Dow 30 index — had more bang for the buck, this morning we saw Jobless Claims, Retail Sales, Import/Export Prices, Philly Fed and Empire State manufacturing and Industrial Production/Capacity Utilization reports all before the opening bell.
Most of this data was stronger than expected, although it can be argued we are in a “good news is bad news” environment within a week of the next Federal Open Market Committee (FOMC) meeting, where the Fed will tighten interest rates 75 basis points (bps) (possibly more). None of today’s data has provided an argument to soften the tightening, at least not to the extent the CPI numbers shrieked that inflation needs to be tamed more strongly.
In addition, September is the month when the steady removal of assets on the Fed’s balance sheet doubles, which some bank analysts warn will lead to higher near-term interest rates. From June through August, $30 billion in Treasury bills were allowed to expire each month, and an additional $17.5 billion on mortgage-based securities; these increase to $60 billion and $35 billion, respectively. Thus, while 2022 is expected to only have rolled off $500 billion of the $9 trillion on the balance sheet, Q1 2023 by itself is projected to dwindle an additional $2.1 billion.
Therefore, the bears patrol our market once again: the Dow slipped -173 points or -0.56%, the S&P 500 is down -1.13%, the Nasdaq fell the most of the four major indices, -1.43%, and the small-cap Russell 2000 dipped -0.72%. It’s tough to imagine a scenario where markets accelerate back up to levels we saw at the beginning of this week, at least until after the Fed issues its new monetary policy and Fed Chair Powell gives a press conference directly following.
Meanwhile, FedEx (FDX - Free Report) has just guided down on its fiscal Q1 2023 earnings, and pretty drastically: the global delivery and logistics giant now expects $3.44 per share, versus a Zacks consensus of $5.06. This comes one week prior to the company’s earnings release. We expect a lowering of FedEx’s current Zacks Rank #3 (Hold) once analysts revise earnings expectations down accordingly. In the statement, the company said macro trends have “significantly worsened.”
FedEx now sees flight reductions, lower labor hour totals, and the closure of 90 FedEx Office stores as a result of these worsened conditions. The company is not only among the first to report in what is known as Q3 Earnings Season, but because of its close connections to Retail, E-commerce, and Global market conditions it is also considered a very important early earnings reporter which shines a light into both the coming earnings season and the global economy as a whole. To see it struggling in this manner is not a great signifier for the future economy.
Image: Bigstock
Purge of New Data Can't Turn Around Markets
In terms of volume, today was the biggest day for economic data in recent memory. Clearly, Tuesday’s Consumer Price Index (CPI) report, which sent the markets screaming downward — including a nearly 1300-point nosedive on the blue-chip Dow 30 index — had more bang for the buck, this morning we saw Jobless Claims, Retail Sales, Import/Export Prices, Philly Fed and Empire State manufacturing and Industrial Production/Capacity Utilization reports all before the opening bell.
Most of this data was stronger than expected, although it can be argued we are in a “good news is bad news” environment within a week of the next Federal Open Market Committee (FOMC) meeting, where the Fed will tighten interest rates 75 basis points (bps) (possibly more). None of today’s data has provided an argument to soften the tightening, at least not to the extent the CPI numbers shrieked that inflation needs to be tamed more strongly.
In addition, September is the month when the steady removal of assets on the Fed’s balance sheet doubles, which some bank analysts warn will lead to higher near-term interest rates. From June through August, $30 billion in Treasury bills were allowed to expire each month, and an additional $17.5 billion on mortgage-based securities; these increase to $60 billion and $35 billion, respectively. Thus, while 2022 is expected to only have rolled off $500 billion of the $9 trillion on the balance sheet, Q1 2023 by itself is projected to dwindle an additional $2.1 billion.
Therefore, the bears patrol our market once again: the Dow slipped -173 points or -0.56%, the S&P 500 is down -1.13%, the Nasdaq fell the most of the four major indices, -1.43%, and the small-cap Russell 2000 dipped -0.72%. It’s tough to imagine a scenario where markets accelerate back up to levels we saw at the beginning of this week, at least until after the Fed issues its new monetary policy and Fed Chair Powell gives a press conference directly following.
Meanwhile, FedEx (FDX - Free Report) has just guided down on its fiscal Q1 2023 earnings, and pretty drastically: the global delivery and logistics giant now expects $3.44 per share, versus a Zacks consensus of $5.06. This comes one week prior to the company’s earnings release. We expect a lowering of FedEx’s current Zacks Rank #3 (Hold) once analysts revise earnings expectations down accordingly. In the statement, the company said macro trends have “significantly worsened.”
FedEx now sees flight reductions, lower labor hour totals, and the closure of 90 FedEx Office stores as a result of these worsened conditions. The company is not only among the first to report in what is known as Q3 Earnings Season, but because of its close connections to Retail, E-commerce, and Global market conditions it is also considered a very important early earnings reporter which shines a light into both the coming earnings season and the global economy as a whole. To see it struggling in this manner is not a great signifier for the future economy.
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