Stocks plunged across the board in an abysmal week for investors. Depressing activity this week heightened expectations for the Fed to continue down the path of aggressive rate hikes.
Barometer Bash
FedEx (FDX) shares plunged Friday after the company pulled its full-year guidance and pre-announced results ahead of its earnings report due September 22. The company’s said the first quarter results are well below estimates. Interestingly - and concerning for investors - FedEx said the second quarter is also likely to be below it's prior estimates.
FedEx's president and CEO said, “Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S…. given the speed at which conditions shifted, first quarter results are below our expectations.”
This is disconcerting for Integrated Freight & Logistics investors as both UPS (UPS) and Amazon (AMZN) fell hard in sympathy with FedEx, with expectations for similar developments down the road.
However, this could be a big red flag for the economy and investors as a whole as FedEx delivers across sectors, making the company a barometer of economic health.
This wasn’t the first barometer company to sound an alarm this week, either. Steel giant Nucor (NUE) - guided sharply lower two days prior. Steel is found in nearly every product, so declining guidance in that industry can reflect eroding demand across the economy.
Guidance from US Steel (X) and Steel Dynamics (STLD) was better when offered the following day (Thursday), but they still came with cautious comments.
CPI
The CPI report was the biggest market mover this week. This report was everything we didn’t want. The headline figure rose 0.1% against estimates for a 0.1% decline. Meanwhile, core CPI jumped 0.6% against estimates for a 0.3% rise. Year-over-year, the headline figure contracted to 8.3%, while the core figure jumped to 6.3%.
Following this report, the odds of a 75 basis point hike at next week's Federal Reserve meeting rose sharply. Meanwhile, inflation's stickiness meant the Fed could stick with larger hikes for longer.
PPI
The Producer Price index had a better showing than CPI, but still didn’t quite meet expectations. Headline PPI met expectations for a 0.1% decline, while core PPI accelerated faster than expected by 0.4%. On a yearly basis, PPI declined to 8.7% and core PPI fell to 7.3%.
Inflation remained high and broad-based, but moderation was welcomed for producers. With price increases and decreases often showing up on the producer side first - before being passed to consumers - the contraction in energy and wholesale prices could help CPI down the line.
Retail Sales
After many months of noting resilience in consumer spending, sales started to lack vigor in August.
Retail sales rose 0.3% against estimates for spending to remain flat. However, excluding automobiles, sales fell 0.3%. Adding salt to the wounds were downward revisions to July’s report, seeing the ex-auto figure revised to 0.0% from 0.4% and the headline figure moving from unchanged to a 0.4% decline.
‘The Merge’
Despite there being high anticipation for the completion of Ethereum’s ‘Merge’, cryptos fell hard this week. Of the ten largest cryptos by market cap, Ethereum faced the steepest selling pressures over the last seven days, more than doubling Bitcoin’s 7.85% drop with a 16.57% plunge.
While there were sky-high expectations for the crypto’s transition to Proof of Stake, it hasn’t entirely delivered yet. Lower gas fees, better security, less environmental impact, and faster transactions were the promises and assumptions made.
However, given that someone paid $60,000 to mint the first NFT post-merge, and that the Ethereum Foundation itself said the upgrade won’t reduce gas fees, we can scratch that hope. Further, improved speeds have been repeatedly denied by Ethereum developers.
In short, we didn’t really get closer to buying a $3 coffee with Ethereum, unless you are comfortable with $11.84 in fees for a fast transfer from your Crypto.com wallet, which I am not.
Anyways, stocks tumbled hard this week. The S&P 500 fell 4.77% while the Dow dropped 4.13%. The Nasdaq plunged 5.48% and the Russell 2000 lost 4.52%.
