FedEx CEO’s warning of a “worldwide recession” weighs on the market

FedEx CEO Raj Subramaniam’s ominous warning of a global recession pushed shares of the shipping company into their worst day in decades on Friday, sending Wall Street’s main indexes to nearly two-month lows.

FedEx’s stock plummeted more than 21% after the company reported a sharp slump in global shipping volumes and withdrew its full-year guidance in an advance release. Friday’s decline was the worst single-day result in the company’s history since at least 1978, according to Dow Jones Market Data.

The company, which will report its first-quarter results next week, expects adjusted earnings per share of $3.44 on sales of $23.2 billion for the quarter. Analysts polled by Refinitiv had expected earnings per share of $5.14 on sales of $23.59 billion.

The company’s struggles resonated with the broader market after CNBC’s Jim Cramer asked Subramaniam if he thought the economy was headed for a “worldwide recession” in an interview Thursday night.

“I think so,” Subramaniam said. “These numbers do not bode well.”

“We mirror everyone else’s business, especially the high-value economy of the world,” added the FedEx CEO.

FedEx is widely seen as a frontrunner for the overall health of the US economy, with a slowdown in shipments fueling fears of a slowdown in economic activity. US GDP has already declined for two straight quarters – the widely accepted definition of a recession.

FedEx is seen as the driving force behind the overall economy.
LightRocket via Getty Images

“We’re seeing this volume drop in every segment around the world, and as you know, we just started our second quarter,” Subramaniam said. “Weekly numbers aren’t looking too good, so at this point we’re just assuming the economic environment isn’t really good.”

Analysts at Deutsche Bank called the quarterly report the worst failure they have followed in 20 years.

Raj Subramaniam
FedEx’s warning sparked fear among investors on Friday.

The Dow quickly fell more than 300 points when it opened Friday before paring losses to close at 139.40. The decline capped a painful week that saw the Dow fall nearly 1,300 points on Tuesday after the release of 8.3% latest inflationary pressures. It ended the week at 30,822.40, its lowest since July 14.

All 11 S&P sectors fell, led by a 2.3% decline in the industrials sector. The Dow Jones Transport Average Index fell 5.1%.

FedEx’s rivals UPS and XPO Logistics fell 4.4% and 6.8%, respectively, while Inc slipped 2.9%.

“What people are worried about is this canary in the coal mine. We’re seeing some warnings from some companies across industries that suggest the outlook may be worse than we priced in,” said Todd Lowenstein, chief equity strategist of Private Bank at Union Bank.

“The market is in a kind of tug of war for the most part. On one side you have these rapidly deteriorating fundamentals, on the other side there was what I call misplaced hope of some sort of Fed pivot revival. The market is increasingly reconciling that the Fed won’t be there to bail it out.”

The Fed is widely expected to deliver its third straight 75 basis point rate hike at its September 20-21 meeting after the latest data failed to reverse the expected course of aggressive monetary tightening.

FedEx’s profit warning on Thursday sparked a frenzy in after-hours trading that spilled over into Friday’s trading. The company’s ticker was the most followed on Yahoo Finance’s platform as investors followed the carnage.

“Global volume declined as macroeconomic trends deteriorated significantly later in the quarter, both internationally and in the US,” Subramaniam added in a company release. “We are addressing these headwinds quickly, but given the speed at which conditions have been changing, the first quarter results are below our expectations.”

FedEx also announced plans for a series of cost-cutting measures, including closing 90 office locations, reducing flight volume and slowing hiring.

Major US stock indexes all closed lower as investors digested the FedEx CEO’s warning. The Dow Jones Industrial Average posted its worst weekly losses since 2020 after falling sharply earlier this week on hotter-than-expected August inflation data. FedEx CEO’s warning of a “worldwide recession” weighs on the market


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