NEW YORK, Sept 16 (Reuters) – US stocks fell to a two-month low on Friday as a FedEx slowdown warning hastened investors’ flight to safety at the end of a turbulent week.
All three major US stock indexes slipped to levels not seen since mid-July, with the S&P 500 slipping below 3,900, a closely watched support level that the benchmark index has been testing for the past few weeks.
At the end of a week rocked by a witch’s brew of inflation worries, looming interest rate hikes and ominous economic warning signs, the S&P 500 is on track for its worst weekly percentage drop since June.
The Nasdaq faces its biggest Friday-on-Friday drop since January, while the blue-chip Dow last suffered a sharper weekly decline in October 2020.
Risk-off sentiment rose from simmer to simmer after FedEx Corp withdrew its earnings forecast late Thursday, citing signs of slowing global demand. Continue reading
FedEx’s move followed statements from the World Bank and IMF, both of which warned of an imminent global economic slowdown. Continue reading
“In the background, investors are thinking about whether or not we’re going to have a recession,” said Tom Martin, senior portfolio manager at GLOBALT in Atlanta. “If we have a recession, we can expect further downside in the stock market.”
A flurry of mixed economic data, dominated by a hotter-than-expected inflation (CPI) report, cemented a rate hike of at least 75 basis points at the close of next week’s Fed monetary policy meeting.
“CPI wasn’t that far off expectations but it means the Fed will stick to its rate hike path,” Martin added. “It will be interesting next week to compare the dot plot curve to what the futures markets are pricing in.”
According to CME’s FedWatch tool, financial markets have priced in a 14% chance of an outsized 100 basis point hike in the Fed’s target fund rate on Wednesday.
At 2:17 p.m. ET, the Dow Jones Industrial Average (.DJI) was down 309.52 points, or 1%, to 30,652.3, the S&P 500 (.SPX) was down 52.93 points, or 1.36%, to 3,848.42 and the Nasdaq Composite (.IXIC) fell 193.45 points, or 1.67%, to 11,358.90.
All 11 major sectors of the S&P 500 were lower, with energy (.SPNY) and industrials (.SPLRCI) suffering the largest percentage declines.
Dow Transports (.DJT), considered a barometer of economic health, fell 6.0%.
That decline was led by FedEx shares, which plunged 22.2%, the biggest drop in the S&P 500 and putting the company on track for its biggest one-day slide ever.
Peers United Parcel Service (UPS.N) and XPO Logistics (XPO.N) fell 4.8% and 5.3%, respectively, while Amazon.com Inc (AMZN.O) fell 2.8%.
The meeting also marked the monthly options expiration, which takes place on the third Friday of each month. Options hedging activity has amplified market movements this year and contributed to increased volatility.
The CBOE Market Volatility Index (.VIX), often referred to as “the fear index,” hit a two-month high, surpassing levels associated with heightened investor anxiety. Continue reading
Declining issuance dominated on the NYSE at a 5.47 to 1 ratio; on the Nasdaq, a 4.34 to 1 ratio favored decliners.
The S&P 500 posted no new 52-week highs and 56 new lows; The Nasdaq Composite posted 11 new highs and 336 new lows.
Reporting by Stephen Culp; additional reporting by Devik Jain and Ankika Biswas in Bengaluru; Editing by Grant McCool
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