A FedEx truck and cars commute on Highway 101 during heavy rain in San Francisco Bay Area of California, United States on December 20, 2023.
Tayfun Coskun | Anadolu | Getty Images
Worst day in months
U.S. markets fell Wednesday, with all major indexes snapping their winning streaks in one of their worst trading sessions in months. Still, U.S. Treasury yields continued to dip. Europe’s Stoxx 600 climbed 0.19%, while the U.K.’s FTSE 100 jumped 1.02% to hit a three-month high on positive inflation news.
UK inflation’s looking OK
U.K. inflation slid to 3.9% in November, the lowest annual reading since September 2021. That figure’s lower than the 4.4% economists had expected, and the 4.6% reading in October. Moreover, prices actually fell 0.2% for the month, compared with estimates of a 0.1% rise. Core consumer price index was also lower than expected, prompting a sharp fall in U.K. 10-year gilt yield.
Citi shutters another unit
Citigroup is closing its global distressed-debt group, CNBC has learned from people with direct knowledge of the move. That closure follows last week’s announcement that the bank’s shuttering its municipal-bond trading operations. CEO Jane Fraser is in the process of restructuring Citigroup, exiting businesses with poor returns to help the bank hit its performance targets.
Tesla’s the “it” stock
Out of all securities on the U.S. market, Tesla’s on pace to attract the most amount of individual investor dollars in 2023, according to data from Vanda Research. That means inflows into the stock will surpass the SPDR S&P 500 ETF Trust, which tracks the largest index in the world. To put Tesla’s popularity in perspective, it wasn’t even among the top 20 stocks retail investors bought before 2019.
[PRO] Due for a breather
Despite the massive rally in markets last week — and, indeed, since November — several strategists are cautioning their clients to be defensive, especially when it comes to the new year. The “rally is ripe for a breather,” wrote one Wall Street strategist, because earnings might falter in 2024.
FedEx‘s performance is often seen as a bellwether for the general economy. When businesses ship fewer parcels, it tends to indicate a slowdown in economic activity.
So, when FedEx issued a worse-than-expected forecast for its current fiscal year, and reported disappointing second-quarter results, it wasn’t solely a warning for investors in the company. FedEx, whose stock sank 12.05%, may also signal trouble for the broader market, according to Wolfe Research.
″[W]hile volatile at times, the correlation between FDX and the S&P has been a solid one,” Wolfe Research managing director Rob Ginsberg wrote on Monday.
“Now, it probably won’t derail the year-end melt-up, but given the multitude of overbought conditions and stretched indicators, a market pricing in perfection just got a bit of troubling news.”
And markets indeed had a bad day. The S&P 500 tumbled 1.47%, the most it’s lost in one session since September. Meanwhile, the Dow Jones Industrial Average fell 1.27% and the Nasdaq Composite lost 1.5% — both indexes snapped their nine-day winning streaks in their worst day since October.
That disappointing showing, however, doesn’t necessarily mean the start of a prolonged slide for markets. Treasury yields are still dipping, which tends to boost stocks. There were also pockets of strength amid the sell-off yesterday. Alphabet, for instance, gained 1.24% and touched a new 52-week high during the session. Consumer confidence in December also picked up, according to the Conference Board.
Keith Buchanan, senior portfolio manager at Globalt Investments, said market losses were “more technical than fundamental,” meaning it was more the breakneck pace at which stocks had been rallying that posed a risk, rather than the their intrinsic value.
“Markets were becoming overbought, and a pullback like this is natural given those conditions,” Buchanan said.
As any recipient of a FedEx package knows, a delayed delivery isn’t the end of the world; you just have to move past the hiccup. The same goes for markets.
