US stock index futures fell to two-month lows on Friday after FedEx, a key player in global distribution, issued a profit warning, alarmed investors who were already concerned that the Federal Reserve’s rapid rate hikes could push the economy into a recession.
Shares of FedEx Corp. fell 20.7% in premarket trade after the firm reported that a slowdown in global demand accelerated at the end of August and that it would get worse in the quarter ending in November.
If losses continue through the day, it will eclipse the stock’s 16.4% decline on Black Monday in 1987 as the biggest percentage drop in a single day.
Amazon.com Inc. was down for 2.6%, while rivals UPS and XPO Logistics fell 7.1% and 6.0%, respectively.
According to Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey, “the Fed will regard the FedEx data as an indicator that they are on the correct path, rather than a warning that the Fed may be going too fast.”
As it appears unlikely that FedEx will reduce pricing in an effort to increase shipments, he doesn’t believe that FedEx is likely to be a part of the lower CPI answer that the Fed is pursuing with higher rates.
However, the benchmark S&P 500 will open below 3,900 points, which traders regarded as a crucial support for the index, according to futures.
After recent data failed to change the anticipated trajectory of aggressive policy tightening, the Federal Reserve is largely likely to announce the third consecutive 75-basis-point rate hike at its policy meeting the following week.
Also, the Fed will increase the reduction of its balance sheet to $95 billion a month in September, a seasonally poor month for markets. But, some investors worry that this move would increase market volatility and have a negative impact on the economy.
At 7:10 a.m. ET, the Dow e-minis had fallen 245 points, or 0.79%, the S&P 500 had fallen 31.5 points, or 0.8%, and the Nasdaq 100 had fallen 115 points, or 0.96%.
As options-hedging activity has helped amplify market movements, the week of the monthly options expiry, which ends on the third Friday of each month, has been marked by higher-than-normal volatility this year.
