[New York Stock Market] FedEx Shock Ahead of FOMC... Nasdaq Down 0.9%

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Major indices on the U.S. New York Stock Exchange closed lower on the 16th (local time) amid warnings of an economic slowdown triggered by FedEx ahead of the Federal Reserve's (Fed) monetary policy decision scheduled for next week.

On Friday at the New York Stock Exchange (NYSE), the Dow Jones Industrial Average fell 139.40 points (0.45%) from the previous session to close at 30,822.42. The S&P 500, which focuses on large-cap stocks, dropped 28.02 points (0.72%) to 3,873.33, while the tech-heavy Nasdaq fell 103.95 points (0.90%) to close at 11,448.40. Investor sentiment further cooled as the FedEx warning piled on top of already mounting downward pressure on the economy due to high inflation and aggressive tightening.

By sector, transportation-related stocks weakened after FedEx withdrew its annual earnings forecast. Transportation stocks are generally considered leading indicators not only for the economy but also for the stock market. FedEx's stock price plunged more than 21% from the previous session, marking the worst single-day drop in history. Competitors UPS and XPO Logistics also fell 4.48% and 4.67%, respectively. Amazon's stock price also dropped more than 2%.

General Electric (GE) slid 3.66% after stating that supply chain issues would be a hurdle to its earnings. Adobe, which plans to acquire design software company Figma for $20 billion, continued its downward trend, falling 3.12% on the day.

Investors monitored corporate earnings and economic outlooks following the FedEx warning released after the previous day's market close, while awaiting next week's FOMC meeting. FedEx's quarterly earnings, disclosed the day before, fell short of market expectations. The company simultaneously withdrew its annual earnings forecast and announced plans to implement cost-cutting measures in response to a global decline in shipping volumes.

FedEx's warning drew attention especially as it came after the release of U.S. Consumer Price Index (CPI) figures that exceeded expectations. This week, the Dow fell more than 4%, the S&P 500 dropped nearly 5%, and the Nasdaq declined 5.5%, marking its worst weekly loss since June. Robert Titter of Silvercrest Asset Management said, "FedEx is traditionally an economic barometer," adding, "FedEx's case is an important story regarding future corporate profit margins."

Ahead of next week's FOMC, expectations of aggressive Fed tightening continue, pushing short-term yields higher in the New York bond market. The two-year Treasury yield, sensitive to monetary policy, surpassed 3.9% in afternoon trading?the first time since November 1, 2007. However, the benchmark 10-year yield fell slightly.

According to the Chicago Mercantile Exchange (CME) FedWatch, the federal funds (FF) futures market reflects an 84% probability of a 0.75 percentage point rate hike in September. The possibility of a 1 percentage point increase, which had been raised immediately after the CPI release, stands at 16%.

Oil prices closed near unchanged amid recession concerns, similar to the previous day. At the New York Mercantile Exchange, October West Texas Intermediate (WTI) crude oil prices closed at $85.11 per barrel, up 1 cent (0.01%) from the previous day. WTI prices fell 1.94% over the week, marking a decline for the third consecutive week.