US stocks showed clear signs of frailty this week despite scoring only slight losses on the major indices, as investors grew more worried over slowing economic growth and corporate earnings.
The markets held tight to gains made at the end of last week on the US Federal Reserve’s Sept. 13 announcement of a third round of quantitative-easing (QE3) measures.
However, the Fed’s promise of lower interest rates and faster growth was quickly trumped by Fedex, which turned in a poor quarter and a gloomy business forecast.
The shipper, a bellwether for the US and global economy, cut its profit forecasts and warned of slower business for the rest of the year as it released its disappointing fiscal first-quarter earnings.
“Weakness in the global economy constrained revenue growth at Fedex Express during our first quarter and affected our earnings,” chief executive officer Frederick Smith said.
Fedex closed the week down 6.4 percent at US$84.39 — not enough to drag down the overall market, but enough to spread a cloud over the mood of trade.
Adding to that was roundly glum economic data from China, Europe and the US, underscoring the sluggishness of the world economy.
The markets held up in part because of the sharp drop in the oil price and Apple’s launch of its new iPhone 5, with sales expectations believed by some to be enough to serve as its own economic stimulus program.
The Dow Jones Industrial Average closed the week off 0.1 percent at 13,579.47. The broad-based S&P 500 shed 0.4 percent to 1,460.15, while the NASDAQ lost 0.13 percent for the week.
Analysts were even surprised that the markets held up as well as they did, given a handful of disappointing US data releases.
“Given the mixed economic data hitting the tape in recent days, we find it somewhat amazing that the stock market remains resilient, not giving up much of the post-Fed QE3 ‘Bernanke bounce’ seen last week,” Art Hogan of Lazard Capital Markets said.
Nevertheless, he added: “Stock prices continue to consolidate.”
“There is going to be a very painful return to reality when you have companies like Fedex, a global bellwether, [worried about] economic fundamentals,” Peter Cecchini of Cantor Fitzgerald said.
“Because nobody really believes the fundamentals, everybody is positioned very lightly,” he said.
Even Apple’s iPhone 5 launch could not do much more than prop up its shares. The world’s biggest company by market cap finally busted through the US$700 line, but ended the week up just 1.3 percent, at US$700.09.
Deutsche Bank analyst Chris Whitmore said demand appeared “very robust” and predicted Apple would sell 133 million iPhones by the end of the year and 180 million next year.
Economic data in the coming week will set the tone of trade, now that most of the big central banks have done their best to spark life into economies.
Releases for data last month include consumer confidence (Tuesday), new home sales (Wednesday), pending home sales and durable goods orders (Thursday) and personal income and spending (Friday).
Also coming on Thursday is an update of the estimate for second-quarter growth, expected to be unchanged at a sluggish 1.7 percent pace.