The stock market is on track for some big weekly losses. A recent report from shipping company FedEx indicates that the business will badly miss its earnings expectations, leading to a sudden drop in its stock price. Investors are taking FedEx’s warning as an indication that the global economy is slowing, and the stock market isn’t reacting well to this negative outlook.
FedEx published a dire pre-earnings announcement Thursday evening, sending its shares–and those of rival UPS–spiraling downward. Investors are worried that persistent inflation and higher prices have convinced shoppers to slow their holiday spending this year ahead of the all-important fourth quarter. Logistics companies like UPS and FedEx rely heavily on the holiday boost they receive when families buy presents and have them shipped to their homes.
Meanwhile, the White House has put out a framework for how it could regulate cryptocurrency. The long-looming regulations on the crypto industry have concerned enthusiasts and investors for years now. Will the White House’s new recommendations transform the industry from the Wild West into a serious financial institution, or will the stubbornly independent crypto sphere react negatively to these changes?
FedEx Announces Earnings Miss
FedEx will likely miss its third-quarter earnings targets by a wide margin, according to a recent warning the company published Thursday evening. The news saw FedEx’s share price sink by as much as 20% as investors weighed the potential risks posed by their exposure to the struggling logistics industry. Meanwhile, shares of unrelated companies like UPS also fell on fears that the same market dynamics could disrupt their business.
Many analysts have pointed out that Amazon could be playing a role in weakening FedEx’s position in the market. “It makes sense to see Amazon to trade off with this but there could also be a competitive element going on here too,” explains JPMorgan’s Jack Atherton. “Coincidentally, Amazon’s Seller conference has been ongoing for the last 2 days which focused heavily on new features for Buy with Prime as it further tries to break down Shopify’s moat.”
Atherton goes on to explain that he’d encourage investors to buy Amazon shares on this news as they unload their FedEx positions. With such massive pressure in the shipping industry, attention now turns to the persistent inflation rate in the US and the Federal Reserve’s attempts to stop the bleeding in the economy.
Stock Market on Pace for Steep Weekly Losses
The FedEx news was only the latest blow for the limping stock market. The three main indexes all tanked this morning at the start of trading, with the S&P 500 sinking 1.2% and the Dow Jones Industrial Average dropping 1.1%. The tech-heavy Nasdaq Composite suffered the worst damage, falling an eye-watering 1.6% on investor uncertainty.
“Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the US,” explained FedEx CEO Raj Subramaniam in the earnings statement. “We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first quarter results are below our expectations.” Those macroeconomic trends he mentioned have made the stock market turbulent and frustrating to navigate for months now, as the global economy tries to grapple with ongoing shipping and demand issues.
Analysts are now dropping their earnings expectations for the third quarter of 2022 amid persistent negative outlooks from major companies. The only industry that seems to have escaped the 2022 sell-off unscathed is the energy industry, which is hardier than ever due to massively inflated oil prices and soaring demand.
Biden’s White House Tackles Crypto Head-On
The Biden Administration has published its framework for crypto regulation in the US. The outline isn’t law but is instead a recommendation for lawmakers to consider when drafting legislation that will govern the use of crypto in the US. The framework outlines ways the financial industry should change its core functionality to make international transactions easier–making it harder for crypto to compete with fiat money like the US dollar.
“The President will evaluate whether to call upon Congress to amend the Bank Secrecy Act, anti-tip-off statutes, and laws against unlicensed money transmitting to apply explicitly to digital asset service providers — including digital asset exchanges and nonfungible token (NFT) platforms,” the White House stated in an official release. This change has been a long time coming–crypto has been a popular investment among tech-savvy users for nearly a decade.
Regulators have warned that the nascent crypto industry is rife with fraud and theft, making government intervention an inevitability. Moreover, there’s a lot of money moving through the crypto industry, and not all of that money is being properly taxed. The government’s regulatory plans would amend this and draw in tax revenue from crypto exchanges, helping offset the energy costs associated with these experimental new forms of money.