FedEx (FDX) shares fell 21% on Friday, the biggest one-day drop in the company's history after the company warned on Thursday night that the slowing economy would keep it $500 million short of its revenue target.
FedEx's express delivery business has been impacted by the global economy's slowing, particularly in Asia and Europe. According to the company, package demand slowed significantly in the final weeks of the quarter.
The business performance of this global delivery company is considered a barometer of the evolution of the world economy, including the United States, and it reflects that there is already a significant drop in economic activity, pointing to recession.
The question is whether the Federal Reserve will consider this circumstance when deciding on interest rates, especially since there are clear signs that inflation has lost strength, despite the latest CPI data disappointing the market by falling less than expected. On the other hand, relevant inflation data published on Friday, the prelim inflation expectations of the University of Michigan fell to 4.6% from 4.8% in the previous month. The Fed closely monitors it to make monetary policy decisions.
Treasury bond yields fell slightly on Friday, around 5 bps across all bond benchmarks, a slight but significant drop as a result of inflation expectations data and the economic slowdown deduced from FedEx's behavior.
Undoubtedly, we will have all the answers to all these questions next Wednesday when the Federal Reserve meets, and in all probability, it will raise interest rates by at least 75 bps. The key will not be how much interest rates will rise but rather the statements made by the Fed's president at the press conference following the meeting and the report that will be released.
There is still the possibility that Powell will slow the pace of interest rate hikes in the coming meetings or, more importantly, become more data-dependent if he recognizes that the economy is in a downward trend. That's like on previous occasions, Powell has stated that the goal is to find a balance in monetary policy that allows for a soft landing for the economy.
US stock indices recovered all the ground lost since the beginning of the session when the inflation figure from the University of Michigan was published. The DowJones30 index closed with very slight gains but from a technical point of view, with a bullish candle on its daily chart that could anticipate a decrease in bearish momentum.