Stocks tumbled Friday as a profit warning from FedEx about weakening business conditions spooked investors, who are also bracing for more interest rate hikes amid higher-than-expected inflation.
Wall Street’s benchmark S&P 500 index lost 50 points, or 1.3%, to 3,850 in early trading Friday, adding to declines after August inflation stayed near a four-decade high despite four interest rate hikes this year to slow the economy. The Dow slumped 1%, while the tech-heavy Nasdaq shed 1.7%.
The market swoon caps a turbulent week, with the Dow, or 3.9%, on Tuesday amid the realization that inflation isn’t subsiding as quickly as hoped after a hotter-than-expected . The inflation data dashed expectations that the Federal Reserve might back off plans for more interest rate hikes. FedEx issued its profit warning late Thursday, saying it expects business conditions to further weaken in the current quarter.
“The bears demolished the bulls for three main reasons: the August CPI overshot expectations, Fed tightening forecasts continued to rise and FedEx described an economy witnessing a sharp slowdown,” Wall Street analyst Adam Crisafulli said in a research note on Friday.
Memphis, Tennessee-based FedEx said Thursday it iswhile putting off new hires in a belt-tightening drive brought on by drop-off in its global package delivery business.
Shares of FedEx plunged $49.27, or 24%, to $155.70 on Friday.
On Thursday, U.S. government data showed unemployment claims last week declined while August consumer sales rose. That gives ammunition to Federal Reserve officials who say the economy can tolerate more rate hikes.
Wall Street’s decline indicates “no sign of relief for risk sentiments” while the job market data “provided the go-ahead for further tightening” in monetary policy, Yeap Jun Rong of IG said in a report.
Prior to Friday’s trading, the market benchmark was down 4.1% for the week following the biggest pullback in two years on Tuesday after the government reported U.S. consumer prices rose 8.3% from a year earlier and 0.1% compared with July.
The overall figure was down from June’s 9.1% peak. But core inflation, which strips out volatile food and energy prices to give a clearer picture of the trend, rose by 0.6% over the previous month, up from July’s 0.3% increase.
Traders worry rate hikes by the Federal Reserve and central banks in Europe and Asia to control price rises might derail global economic growth. Two of the Fed’s rate hikes this year have been by 0.75 percentage points, triple its usual margin. Traders expect a similar increase this month.
Fed chair Jerome Powell said in August that rates would stay elevated for some time until the U.S. central bank is sure inflation is under control.
In energy markets, benchmark U.S. crude lost 46 cents to $84.64 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $3.38 on Thursday to $85.10. Brent crude, the price basis for international oil trading, sank 33 cents to $90.51 per barrel in London. It lost $3.26 the previous session to $90.84.