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US Stocks: Futures hit two-month lows as FedEx warning stokes slowdown fears

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U.S. stock index futures tumbled to two-month lows on Friday after a profit warning from global delivery bellwether FedEx spooked investors already worried about aggressive rate hikes from the Federal Reserve tipping the economy into a recession.

Shares of FedEx Corp plunged 20.7% in premarket trading after the company said a global demand slowdown accelerated at the end of August and predicted that it would worsen in the November quarter.

Rivals UPS and XPO Logistics slid 7.1% and 6.0% respectively, while Amazon.com Inc AMZN.O slipped 2.6%.

“The Fed will view the FedEx report as an indication that they are on the right path, rather than a warning that the Fed may be moving too aggressively,” said Rick Meckler, a partner at Cherry Lane Investments in New Vernon, New Jersey.

Also Read: Global Markets: European stocks set for weekly loss as global economic outlook worsens

“I don’t believe that FedEx is likely to be part of the lower CPI solution that the Fed is seeking with higher rates, as it seems unlikely that they will cut prices in an effort to boost shipments.”

Futures signaled that the benchmark S&P 500 would open below 3,900 points, a level that traders considered as a key support for the index.

The Federal Reserve is widely expected to deliver the third straight 75-basis-point rate hike at its policy meeting next week after recent data failed to alter the expected course of aggressive policy tightening.

Adding to the somber mood, the World Bank said the global economy might be inching toward a recession, while the International Monetary Fund said it expected a slowdown in the third quarter.

September, which is a seasonally weak period for markets, will also see the Fed ramp up the unwinding of its balance sheet to $95 billion per month, a move some investors fear may add to volatility in markets and weigh on the economy.

At 07:10 a.m. ET, Dow e-minis were down 245 points, or 0.79%, S&P 500 e-minis were down 31.5 points, or 0.8%, and Nasdaq 100 e-minis were down 115 points, or 0.96%.

Meanwhile, the week of the monthly options expiration – ending on the third Friday of every month – has been marked by a greater-than-usual volatility this year, as options-hedging activity has helped amplify market moves.

On average, the S&P 500 has fallen 1.8% in options expiration weeks, compared with an average weekly gain of 0.09% in non-expiration weeks, according to a Reuters analysis.

The CBOE volatility index, also known as Wall Street’s fear gauge, rose to 27.62 points.

All the three indexes are set for sharp weekly fall, with the tech-heavy Nasdaq down 4.6%.

Uber Technologies Inc dipped 4.7% as the ride hailing platform was investigating a cybersecurity incident after a report that its network was breached.

Equity investors poorer by Rs 4.90 lakh cr as Sensex tumbles nearly 2 pc

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Investors’ wealth eroded by over Rs 4.90 lakh crore on Friday amid a sharp fall in equities.

The 30-share BSE Sensex tanked 1,020.80 points or 1.73 per cent to settle at 58,098.92. During the day, it tumbled 1,137.77 points or 1.92 per cent to 57,981.95.

This is the third day of decline for the equity market and the BSE benchmark has fallen by 1,620.82 points or 2.71 per cent during this time.

In three days, investors wealth has eroded by Rs 6,77,646.74 crore.

“With the latest round of interest rate tinkering by the US central bank, investors have turned risk averse and are dumping shares at will. Traders are also worried about the escalation in Russia-Ukraine conflict, which is prompting them to exit equities and park funds in safe haven dollar assets,” said Amol Athawale, Deputy Vice President – Technical Research, Kotak Securities Ltd.

Also Read: US Stocks: Futures slide more than 1% on growth concerns

Among the 30-share Sensex pack, Power Grid slumped 7.93 per cent. The other major laggards were Mahindra & Mahindra, State Bank of India, Bajaj Finserv, Bajaj Finance, NTPC, HDFC and IndusInd Bank.

Sun Pharma, Tata Steel and ITC were the only gainers.

In the broader market, the BSE midcap gauge declined 2.28 per cent and smallcap went lower by 1.92 per cent.

All the BSE sectoral indices ended in the red, with utilities tumbling 3.48 per cent, power by 3.40 per cent, realty (2.97 per cent), financial services (2.56 per cent), telecommunication (2.17 per cent), capital goods (2.06 per cent) and consumer discretionary (1.82 per cent).

“Indian equity markets witnessed a sharp fall on weekend due to weak global cues. We were outperforming but the level of 112 in the dollar index and the level of 82 in USD INR spooked the market sentiments. FIIs have started selling again in the Indian equity market therefore we are seeing selling pressure in large-cap stocks,” Santosh Meena, Head of Research at Swastika Investmart Ltd, said.

Elsewhere in Asia, markets in Seoul, Tokyo, Shanghai and Hong Kong ended lower.

European bourses were trading in the red in mid-session deals. The US markets ended in the negative territory on Thursday.