Stocks Fall on Economic Growth Concerns Sparked by FedEx News

What you need to know…

The S&P 500 Index ($SPX) (SPY) this morning is down -1.29%, the Dow Jones Industrials Index ($DOWI) (DIA) is down -0.97%, and the Nasdaq 100 Index ($IUXX) (QQQ) is down -1.46%. 

Stocks this morning are moderately lower, with the S&P 500 falling to a 1-3/4 month low and the Dow Jones Industrial and Nasdaq 100 falling to 2-month lows.  Economic growth concerns are weighing on stocks this morning, led by a plunge of more than -20% in FedEx after the company withdrew its earnings forecast, citing weakening business conditions.  Stocks recovered from their worst levels today, and the 10-year T-note fell back from a 3-month high, after economic news showed a University of Michigan survey on inflation expectations unexpectedly declined.

Today’s quarterly expiration of stock index futures and options, known as triple witching, could increase volatility and exacerbate moves in stock prices today.

Negative carry-over from a -2.3% slump in China’s Shanghai Composite to a 3-1/2 month low is also weighing on U.S. equity markets this morning.  Chinese stocks fell despite better-than-expected Chinese industrial production and retail sales, which was explained away by a low base for comparison from a year ago.  Also, today’s economic news shows China’s housing crisis deepened after China new home prices in August fell for the twelfth straight month.

The University of Michigan’s U.S. Sep consumer sentiment index rose +1.3 to 59.5, weaker than expectations of 60.0.  However, the University of Michigan's 5-10 year inflation forecast unexpectedly dropped to a 14-month low of 2.8%, slightly lower than expectations of unchanged at 2.9%.

Today’s stock movers…

FedEx (FDX) is down more than -23% today to lead losers in the S&P 500 after it reported Q1 preliminary adjusted EPS of $3.44, well below the consensus of $5.10, and then pulled its fiscal 2023 earnings forecast, citing weakness in Asia and challenges in Europe.  FedEx also said conditions could deteriorate further in the current period.  United Parcel Service (UPS) and XPO Logistics (XPO) are down more than -6% on the news, and Amazon.com (AMZN) is down more than -3%.

International Paper (IP), Westrock (WRK), and Packaging Corp of America (PKG) are all down more than -9% today after Jeffries downgraded the stocks to underperform from hold, citing a “massive inventory glut in containerboard.” 

Adobe (ADBE) is down more than -4% today, adding to Thursday’s -16% plunge, after Barclays downgraded the stock to equal weight from overweight, saying the company’s purchase of Figma “makes it hard to argue for multiple expansion.”

General Electric (GE) is down more than -4% today after CFO Happe said during a Morgan Stanley conference that the company continued to see supply-chain pressures. 

Chinese economic concerns are weighing on U.S.-listed Chinese stocks today.  Pinduoduo (PDD) is down more than -6% to lead losers in the Nasdaq 100. Also, Baidu (BIDU) is down more than -3%, and JD.com (JD) and Alibaba Group Holding (BABA) are down more than -2%.

Lucid Group (LCID) is up more than +4% today to lead gainers in the Nasdaq 100 after Citigroup resumed coverage of the stock with a buy rating.

Homebuilders are climbing today as the recent plunge in the stocks has attracted dip buyers.  Lennar (LEN) is up more than +2%.  Also, DR Horton (DHI), PulteGroup (PHM), and Toll Brothers (TOL) are up more than +1%.

Texas Instruments (TXN) is up more than +1% today after it boosted its quarterly dividend by 8% to $1.24 a share and authorized $15 billion in share repurchases. 

Across the markets…

Dec 10-year T-notes (ZNZ22) today are up +9 ticks, and the 10-year T-note yield is down -3.3 bp at 3.417%. Dec T-notes this morning rebounded from a 3-month low, and the 10-year T-note yield retreated from a 3-month high of 3.488%. Short-covering in T-notes emerged after today’s economic news showed the University of Michigan’s 5-10 year inflation forecast unexpectedly dropped to a 14-month low of 2.8%, slightly lower than expectations of unchanged at 2.9%.  T-notes this morning initially moved lower on negative carry-over from a fall in 10-year German bunds to a 3-month low.  The markets have fully priced a +75 bp rate hike at next week’s FOMC meeting.

The dollar index (DXY00) this morning is up +0.29% at a 1-week high.  A plunge in GBP/USD today to a 37-year low and a decline in the Chinese yuan to a 2-year low supports gains in the dollar. Also, a slump in stocks today has boosted liquidity demand for the dollar.

EUR/USD (^EURUSD) today is down -0.37% at a 1-week low.  Dollar strength today is undercutting the euro. Also, the euro is being undercut by concern that tighter ECB policy will push the Eurozone economy into recession after ECB Vice President Guindos said today that “more ECB rate hikes might come in the next few months." 

ECB President Lagarde said, "the ECB must focus on our price-stability target, which we've set at 2% over the medium-term, so we have to use all the monetary policy tools available to us to reach this target."

ECB Vice President Guindos said, "the slowdown of the economy is not going to take care of inflation on its own, so more ECB rate hikes might come in the next few months."

Eurozone Aug new car registrations rose +4.4% y/y, the first increase in 14 months.

USD/JPY (^USDJPY) today is down -0.27%.  The yen is moderately higher after a -1.1% decline in Japan’s Nikkei Stock Index today to a 1-week low prompted some safe-haven demand for the yen.  Also, the yen has support on signs the BOJ may soon intervene in the currency market to support the yen.

October gold (GCV2) is up +8.2 (+0.49%), and December silver (SIZ22) is up +0.136 (+0.71%).  Precious metals this morning recovered from early losses and are slightly higher. Gold prices rebounded from a 2-1/2 year low today and moved higher after T-note yields declined.  Today’s stock selloff has boosted some safe-haven demand for precious metals and gold prices.  Metals price this morning initially moved lower as a rally in the dollar index to a 1-week high pressured metals prices.   

• Take Advantage of the Dip: 3 Top Stocks To Consider
• Before the Bell: Stocks Tumble as FedEx Sinks on Slumping Demand
• Pre-Market Brief: Stocks Slump As Recessionary Fears Grow
• UnitedHealth Iron Condor Could Net $200 From A Stable Stock Price