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FedEx Has Biggest Drop in Over 40 Years After Pulling Forecast – Yahoo Canada Finance

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(Bloomberg) — FedEx Corp. lost $11 billion in market value, wiping out two years of stock gains, after withdrawing its earnings forecast on worsening business conditions.

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In a potentially worrying sign for the global economy, the package-delivery giant flagged weakness in Asia and challenges in Europe as it pulled its prior outlook and reported preliminary results for the latest quarter that fell well short of Wall Street’s expectations. Conditions could deteriorate further in the current period, FedEx said.

The company will take immediate steps to cut costs, including parking some aircraft, cutting workers’ hours and closing more than 90 of its roughly 2,200 FedEx Office locations.

While US economic data has been mixed, with employment and manufacturing holding up, companies across industries are starting to paint a grimmer picture of the economy. Conditions in Asia and Europe also appear to be weighing on the US, where consumers are shifting spending into travel and concerts and away from online shopping.

FedEx’s stock plunged 21% Friday in New York, the biggest one-day drop since at least 1980. At $161.02, the shares fell to the lowest level since July 2020.

Put simply, it was an “ugly quarter,” according to Robert W. Baird & Co. analyst Garrett Holland. “Global freight demand has significantly deteriorated.”

Analysts with Deutsche Bank AG went further, calling it “the weakest set of results we’ve seen relative to expectations” in about two decades of analyzing companies.

FedEx’s announcement added to the growing gloom from companies across industries. General Electric Co.’s chief financial officer warned Thursday that the company is seeing pressure on cash flow amid supply-chain snags, while industrial titans U.S. Steel Corp., Alcoa Corp. and Nucor Corp. have said deliveries are waning. The chief executive officer of McDonald’s Corp. said earlier this week he expects a minor US recession in 2023 and a more significant one in Europe.

Recalibrated Spending

At the same time, retailers such as Walmart Inc. and Target Corp. have scaled back expectations as consumers recalibrate their spending. In August, shipping containers arriving in Los Angeles — the US’s busiest port — fell by the most since the early days of the pandemic, which is another sign that demand is moderating.

FedEx’s bleak comments are a setback for its new CEO, Raj Subramaniam, who had won investor support shortly after taking the reins in June by raising the dividend, agreeing to revamp the board and laying out a multiyear plan to boost profit. Subramaniam now must steer the courier through a post-pandemic economy in which consumers are spending more on services than discretionary purchases.

Earnings, excluding some items, for the fiscal first quarter were projected to be $3.44 a share, Fedex said in a statement late Thursday detailing preliminary results. That’s well short of the $5.10 average estimate of analysts. Preliminary revenue of $23.2 billion in the period ended Aug. 31 narrowly missed expectations.

What Bloomberg Intelligence Says:

Freight transportation shares are reeling after FedEx’s FY1Q pre-announcement that came in well below expectations. There’s no doubt that global demand is moderating, but most of the headwinds FedEx is facing are more company specific in nature.

— Lee Klaskow, transportation analyst

Click here to read the research

“Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the US,” Subramaniam said in the statement.

The news triggered a raft of downgrades and price target cuts from Wall Street analysts. UBS AG analyst Thomas Wadewitz said the Express business is the primary driver of weak performance, though Ground operations also missed estimates.

“Express operating income was 75.8% lower than our forecast and Ground operating income 7.5% lower than our forecast,” Wadewitz said in a note to clients. “While we understand that Express is an asset-intensive business with a high fixed cost structure, we have a difficult time understanding what items could drive operating income lower to the extent seen.”

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Retail sales fall for 1st time this year as consumers start to tap out – CBC News

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Facing sky-high inflation, consumers put away their wallets more often in July, new data revealed Friday, as retail sales fell for the first time since 2021.

Canadian retailers rang up $61.3 billion in sales in July, Statistics Canada reported Friday. That’s a decline of 2.5 per cent from the previous month’s level as lower sales at gas stations and clothing stores led the way down.

Sales at gas stations fell by 14 per cent. A big part of that was lower prices for the fuel itself, but even in volume terms sales were down by seven per cent. Fewer people were filling up during the month, which was in keeping with the vehicle segment overall as auto sales edged down 0.5 per cent. Both new and used car dealers reported declines.

Consumables like food and drink also weren’t flying off the shelves, as supermarkets and grocery stores saw sales slip by 0.9 per cent, while liquor stores saw a decline of 1.2 per cent.

The soft retail sales numbers suggest consumers are starting to put away their wallets in the face of sky-high prices and a gloomy outlook for the economy.

“This retail sales report was unambiguously weak, suggesting that consumers tightened their purse strings in July,” TD Bank economist Ksenia Bushmeneva said of the numbers. “Consumer demand appears to have broadly cooled across most categories of spending.”

“All in all, given the triple headwinds emanating from higher consumer prices, rapidly rising interest rates and a drop in wealth, consumers are becoming more frugal,” she said.

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Dow drops but narrowly avoids confirming bear market status – Reuters.com

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Sept 23 (Reuters) – The blue-chip Dow Jones Industrial Average (.DJI)tumbled to its lowest level since November 2020 on Friday, but narrowly missed ending more than 20% below its Jan. 4 closing record high.

A Dow close below 29,439.72 would have confirmed a bear market that began from that record, according to a widely used definition. read more The Dow fell 486.27 points, or 1.62%, to end at 29,590.41.

The Dow is the only one of the three main indexes not to have bear market status. The S&P 500 (.SPX) notched that grim milestone in June and the Nasdaq (.IXIC) in March.

The renewed selling pressure in markets came in a week that saw the U.S. Federal Reserve raise interest rates by three-quarters of a percentage point for a third straight time and a vow to keep it going until inflation is under control.

It has been a tumultuous year for Wall Street, plagued by worries about Russia’s invasion of Ukraine, an energy crisis in Europe and the end of easy money policy globally.

The S&P 500 has lost 23% this year and the Nasdaq has shed 31%.

The last time the three indexes pulled back so sharply was in 2020 during the heights of the pandemic selloff.

Heightened fears of a U.S. economic downturn next year and its impact on corporate profits has prompted brokerages to downgrade their year-end targets for the S&P 500. read more

Dow Jones Industrials bear markets

Dow Jones Industrials bear markets

(This story refiles to fix typo in headline)

Reporting by Medha Singh in Bengaluru; additional reporting by Caroline Valetkevitch in New York; Editing by Shounak Dasgupta, Shinjini Ganguli, Maju Samuel and Diane Craft

Our Standards: The Thomson Reuters Trust Principles.

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TSX slumps as oil falls below $80 and economic gloom settles in – CBC News

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Canada’s benchmark stock index dropped heavily on Friday as prospects of a global recession cause investors to sell first and ask questions later.

The S&P/TSX Composite Index was off by more than 520 points or 2.75 per cent to close at 18,480, dragged down by a plunge in the price of oil. That’s the lowest level for the benchmark Canadian stock index since July.

The benchmark price of crude oil in North America lost almost $5 to close at $79.13 a barrel, its lowest price since January. The catalyst for oil’s decline seems to have been central banks signaling this week that they are so committed to reining in inflation that they are willing to create a recession to achieve it.

The U.S. Federal Reserve hiked its benchmark interest rate on Wednesday, and nine other countries around the world followed suit the next day. That will help bring down inflation, but it will likely come at great cost to the economy.

“Clearly what they are saying is they are so determined to bring inflation down that they are going to bring down the economy in the process,” said John Zecher, the founder of Toronto-based money manager J Zechner & Associates. “That’s the way the market is reading it … They aren’t going to stop until the economy turns down.”

Oil price down to lowest since January

A recession would lead to much less demand for energy, which is why oil sold off. About a fifth of the companies on the TSX are in the energy sector, and they were among the biggest losers Friday. Shares in Suncor, Cenovus, MEG Energy and Crescent Point all lost more than eight per cent on the day.

More and more economic indicators are starting to suggest Canada’s economy either already has derailed or is about to. Employment numbers last week showed the economy has lost jobs for three months in a row, and retail sales data on Friday showed that Canadians are putting away their wallets once more.

Stock markets are responding to that gloom, and some analysts think there is a lot more pain to come.

“The lows that we saw recently in the summer months are going to be challenged in the next couple of days to weeks,” said Larry Berman, chief investment officer with Toronto-based money manager QWealth, in an interview.  “The market [isn’t] priced for what the central banks are going to do.”

The Canadian dollar dipped as low as 73.61 cents US, its lowest level in more than two years.

Shares in New York also sold off, with the Dow Jones Industrial Average closing down almost 500 points to 29,590 — its lowest level of the year.

“Over the next couple of weeks, long-term investors may hesitate buying into weakness,” said Edward Moya, an analyst with foreign exchange firm Oanda. “How far we go below the summer lows is anyone’s guess.”

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