Bearish sentiment arising out of a gloomy macroeconomic forecast
by FedEx Corp was somewhat offset by positive housing data to leave
the benchmarks mostly mixed. Investors also opted to take a respite
following last week's robust four-day rally, spurred by the
anticipation and thereafter the announcement of additional economic
measures. Meanwhile, another drop in crude prices affected the
energy sector for the second day in a row.
The Dow Jones Industrial Average (DJI) emerged as the only
gainer, ending a mere 0.09% higher at 13,564.64. The Standard &
Poor 500 (S&P 500) slipped 1.87 points or 0.1% to finish
yesterday's trading session at 1,459.32. The tech-laden Nasdaq
Composite Index hardly changed as it lost 0.03% to end at 3,177.80.
The fear-gauge CBOE Volatility Index (VIX) dropped 2.8% to settle
at 14.18. Consolidated volumes on the New York Stock Exchange, the
Nasdaq and the American Stock Exchange were roughly 5.9 billion
shares, lower than the year-to-date daily average of 6.5 billion
shares. Declining stocks outnumbered the advancers on the NYSE; as
for 54% stocks that dropped, 43% stocks closed in the green.
Benchmarks opened in the red and languished in such territory
after FedEx Corporation (NYSE:
) slashed its full year guidance. The company now expects 2013
earnings per share in the range of $6.20-$6.60, down from
$6.90-$7.40. The company said the profit warning was also a reason
for customers shifting to lower-budget carriers. Lower guidance by
one of the world's biggest package delivery firms is a serious
concern as it hinted at a slowdown in global economic conditions.
In fact, the concerns were evident as the company itself spoke of a
'stalling' global economy. Chief Financial Officer Alan Graf said:
"Weak global economic conditions dampened revenue growth (and)
drove a shift by our customers to our deferred services and
outpaced our near-term ability to reduce FedEx Express operating
costs to match demand levels".
More importantly, FedEx reduced estimates for US economic growth
to 2.2% in 2012 and 1.9% in 2013. The company's management stated:
"Global trade has grown faster than GDP, except for the 2000, 2001
meltdown and 2008 and 2009 for 25 years. And over the last few
months, that has not been the case.... exports and trade have gone
down at a faster rate than GDP has."
Earlier this month, FedEx had slashed its first quarter earnings
estimate from $1.45 to $1.60 per diluted share to a range of $1.37
to $1.43 per share. The profit warning was a result of "weakness in
the global economy". This time, FedEx once again reminded investors
of the grim global economic situation, by once again cutting yearly
profit estimates and expectations for slower economic growth.
Shares of FedEx slumped 3.1% and that of its peer - United Parcel
Service, Inc. (NYSE:
) dropped 1.0%.
However, the negative sentiment was somewhat offset by
encouraging housing data. The National Association of Home
Builders/Wells Fargo housing-market index jumped its highest levels
in more than 6 years. The index recorded a gain of 3 points to
reach a seasonally adjusted reading of 40. Street estimates
projected it to be around 38.
Separately, a drop in oil prices dented the energy sector for
the second straight day and it was one of the biggest laggards
among the S&P industry groups. The Energy Select Sector SPDR
(ETF) dropped 0.7% and stocks including Chevron Corporation (NYSE:
), TOTAL S.A. (ADR) (NYSE:
), Exxon Mobil Corporation (NYSE:
), Marathon Oil Corporation (NYSE:
) and Murphy Oil Corporation (NYSE:
) plunged 0.2%, 0.6%, 0.3%, 1.6% and 1.4%, respectively.
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