Dec 20, 2023: U.S. stocks experienced a modest decline on Wednesday, halting their recent rally, influenced in part by a disappointing full-year forecast provided by delivery giant FedEx.
As of 09:35 ET (14:35 GMT), the Dow Jones Industrial Average dipped by 80 points (0.2%), the S&P 500 decreased by 8 points (0.2%), and the NASDAQ Composite dropped by 20 points (0.1%).
Despite a strong December and a positive 2023, driven by optimism surrounding potential Federal Reserve interest rate cuts in the coming year, recent guidance from FedEx has paused the market’s upward trajectory.
Investor Expectations: There’s an increased probability of a 25 basis point cut by the Fed in March, now standing at over 72%, up from 43% the previous week according to Investing.com’s Fed Rate Monitor Tool. Goldman Sachs also raised its 2024 S&P 500 target by 8% to 5,100, citing potential advantages for U.S. stocks due to decreasing inflation and interest rates.
FedEx’s Disappointing Guidance: FedEx, considered a crucial indicator of U.S. economic health, reported a bleak outlook, resulting in an 11% drop in its stock value. Slashed revenue forecasts and weaker quarterly profits were attributed to anticipated headwinds in customer demand, echoing concerns about volatile macroeconomic conditions.
General Mills also experienced a 3.5% decline after revising its annual sales outlook and missing second-quarter estimates, pointing to a slower demand recovery.
Economic Indicators: Today’s economic data includes consumer confidence data for December and existing home sales for November. However, investors await Friday’s core Personal Consumption Expenditures price index, essential for gauging inflation trends and the potential for Fed policy adjustments.
Oil Prices: Oil prices, despite an unexpected U.S. crude stockpile increase reported by the American Petroleum Institute, have risen. This rise is attributed to the geopolitical tension in the Red Sea region and concerns over potential disruptions in oil supplies following attacks by the Yemen-backed Houthi group.
By 09:35 ET, U.S. crude futures surged 1.8% to $75.26 a barrel, while the Brent contract climbed 1.6% to $80.46 a barrel. The market remains watchful of the Energy Information Administration’s official report, expected later in the session, for further insights into U.S. production levels.
