Bellwether firm FedEx's profit warnings denied most of the
benchmarks a finish in the green on Wednesday. While the profit
warning was an immediate headwind in the morning, markets swayed
between gains and losses as investors remained edgy over the
outcome of the ECB meeting on Thursday. Investors' reluctance
to bet big was evident in the paltry movement of the
The Dow Jones Industrial Average (DJI) edged up 0.1% and closed
at 13,047.48. The Standard & Poor 500 (S&P 500) slipped a
mere 1.50 points or 0.1% to finish yesterday's trading session at
1,403.44. The tech-laden Nasdaq Composite Index ended at 3,069.27,
after dropping just 5.79 points or 0.2%. The fear-gauge CBOE
Volatility Index (VIX) declined by 1.3% to settle at 17.74.
Consolidated volumes on the New York Stock Exchange, Nasdaq and the
American Stock Exchange were roughly 5.49 billion shares, sharply
lower than last year's daily average of 7.84 billion. Declining
stocks outnumbered the advancing ones on the NYSE; as for 50%
stocks that dropped, 46% stocks closed higher.
Markets opened on a tense note as FedEx Corporation (NYSE:
), one of the world's biggest package delivery firms, said it now
expects lower profits for first quarter fiscal 2013 than previously
forecasted. Earnings estimate for the quarter was slashed from
$1.45 to $1.60 per diluted share to a range of $1.37 to $1.43 per
share. The profit warning is a result of "weakness in the global
economy", and this statement from the company went on to unnerve
Investors were thus reminded of the grim global economic
situation. FedEx's operations include shipments on a global scale.
Therefore, its financial health can largely be tied to the health
of companies around the world. A drop in profits for FedEx would
suggest a lower amount of shipments globally or that companies are
opting for lower budget package delivery services. In either case,
global economic weakness was highlighted.
Shares of FedEx dropped 2.0% and that of its rival United Parcel
Service, Inc. (NYSE:
) slumped 2.4%. Moreover, the disclosure not only affected FedEx's
or UPS' shares, but the negative sentiment affected the broader
Among the sectors, the technology sector closed lower with
Technology SPDR (XLK) dropping 0. 1%. As for the tech stocks, Intel
), Advanced Micro Devices, Inc. (NYSE:
), Broadcom Corporation (NASDAQ:
), QLogic Corporation (NASDAQ:
) and Western Digital Corp. (NASDAQ:
) plunged 0.1%, 3.6%, 1.2%, 1.2% and 1.1%, respectively.
Markets also expectantly awaited the outcome of the crucial
European Central Bank meeting on Thursday. The European debt crisis
is nothing new for investors. This has battered even the US markets
for a prolonged period. Over the past month there have been both
positive and negative developments across the Atlantic. Comments by
ECB President Mario Draghi that the central bank will do "whatever
it takes" to preserve the euro had sparked off significant cheer.
Later, there were indications that the ECB will buy back Italian
and Spanish bonds. Reports also suggested that the ECB is
considering a 'yield band target' for the bond purchase plan.
However, the plan hit some roadblocks with German central bank,
Bundesbank, opposing the ECB's idea to go ahead with bond
Thus, the meeting on Thursday will be of particular interest to
investors who are hoping that the ECB will launch a new bond
purchase plan. Italian and Spanish bonds are expected to be in the
focus, as these nations are fighting incremental borrowing costs.
Also, the central bank may reduce its short-term interest rate.
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