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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.

FPIs infuse Rs 12,000 cr in Indian equities in Sep on hopes of slow rate hikes 

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Foreign investors pumped Rs 12,000 crore into the Indian equity market so far this month on hopes that global central banks, particularly the US Fed, may go slow on rate hikes as inflation starts to cool off. This comes following a net investment of staggering Rs 51,200 crore in August and nearly Rs 5,000 crore in July, data with depositories showed.

FPIs turned net buyers in July after nine straight months of massive net outflows, which started in October last year. Between October 2021 till June 2022, they sold a massive Rs 2.46 lakh crore in the Indian equity market.

According to data with depositories, FPIs (foreign portfolio investors) pumped a net Rs 12,084 crore into Indian equities during September 1-16. They were net buyers on hopes of continued growth momentum, even as global and domestic data prints were adverse with elevated inflation reported across major economies, Chouhan said.

Also Read: FREED: This startup helps borrowers get out of the debt trap – Here’s how 

“Foreign investors continued to invest into Indian equities on expectation that global central banks, particularly US Fed, may go slow on rate hikes as the inflation starts to cool off,” Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, said.

Additionally, given Indian equities would be an attractive investment destination as inflation cools off and the economy embarks on growth trajectory, FPIs would have preferred to stay invested than losing out on that opportunity, he added. Also, Indian equities went through a correction phase making them relatively attractive on valuations. This provided them a good buying opportunity to hand-pick high quality companies.

The sustained FPI buying that started in July and gathered momentum in August and continued in September too, supported the recent rally in the Indian market.

However, they turned sellers in last few days of the current month on fears of global economic slowdown. FPIs are likely to wait and watch before resuming their buying in India, VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said.

Morningstar India’s Srivastava said the recent CPI data in the US disrupted the trend of cooling inflation, thereby dashing hopes that the US Fed could take breather after September and ease up on its interest rate hikes. The August US inflation edged 0.1 per cent higher from the preceding month to 8.3 per cent. Compared to the year-ago period, it eased from 8.5 per cent.

Apart from equities, FPIs infused a net Rs 1,777 crore in the debt market during the month under review. In addition to India, Indonesia and the Philippines witnessed inflows, while Taiwan, South Korea and Thailand witnessed withdrawals during the period under review.