The algo-enthused ramp into the cash close has been entirely erased after hours as futures tumbled, led by belwether FedEx which cut its profit forecast and announced an international capacity reduction as the courier grapples with a slowdown in global trade.
“While the U.S. economy remains solid, our international business weakened during the quarter, especially in Europe. We are taking action to mitigate the impact of this trend through new cost-reduction initiatives.”
As Bloomberg reports, FedEx slashed its target for adjusted earnings in fiscal 2019 to $15.50 to $16.60 a share from a previous goal of $17.20 to $17.80.
The company also said in a statement that it won’t meet a target for operating-profit growth at the Express unit of $1.2 billion and $1.5 billion in fiscal year 2020.
FedEx is also getting hurt in Europe, where “economic weakness that accelerated during the quarter” will delay the benefit of the company’s acquisition of TNT Express.
That sent FDX lower...
However, the company fueled concerns about the economic outlook as CFO Alan Graf said:
“Global trade has slowed in recent months and leading indicators point to ongoing deceleration in global trade near-term,”
“These trends, coupled with the change in service mix at FedEx Express, are negatively impacting the segment’s financial results. We remain committed to actively managing costs with a heightened focus on increasing efficiency across the organization.”
The guidance cut, coming three months after the company had raised its outlook, shows how quickly the economic environment has changed.
And along with a notable miss by Micron...
...the largest U.S. maker of computer memory chips, reported sales that fell short of analysts’ estimates, adding to concern that a two-year surge in demand for its products is over.
“The memory crash continues to get worse,” Citigroup analyst Christopher Danely said in a note last week. “We expect Micron to guide below consensus.”
And between FDX and MU, this triggered broader risk-off concerns that sent S&P futures back to the lows of the day session...
But what about the strongest economy ever?