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US stocks recover sharply after weeks in the red
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The Week Ahead: Last week’s bear market rally in US equities looks more likely to be fragile.
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FedEx delivers revenue concerns, but shares rise

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FedEx fails to deliver strong Q3, shares dip

The news shaping the markets today

S&P lowered Russia’s rating from CCC- to CC due to the difficulties faced by the country in meeting debt payments. However, the RUB/USD forex pair remained flat after the news.


Japan slapped new sanctions on Russia’s defence officials and state-owned arms exporter Rosoboronexport, as well as asset freezing on seven banks and 12 other organisations. The prolonged Russia-related tensions sent WTI crude oil prices higher this morning.


Japan’s consumer prices rose by 0.9% year-over-year in February, following a 0.5% rise in the previous month, which exerted pressure on the JPY/USD forex pair.


The Philippines reported an easing of its unemployment rate to 6.4% in January, from 8.8% in the year-ago month. However, the PHP/USD pair declined in forex trading this morning due to a decline in investor risk appetite.


US industrial production grew 0.5% in February, versus 1.4% growth in the previous month. The latest reading was in-line with expectations, which sent the Dow Jones index higher by more than 400 points on Thursday.

 

What’s happening: Shares of FedEx Corporation fell in after-hours trading on Thursday, despite the company reporting upbeat revenues for its fiscal third quarter.

What happened: The company’s latest-quarter results were driven by lower variable compensation costs.

However, investors were unimpressed with the delivery firm’s earnings, which fell short of the consensus estimate. FedEx also announced a management change.

How were the results:

  • The Memphis-based company reported growth in both sales and earnings for the quarter ending February 28.
  • Revenues grew almost 10% to $23.6 billion, surpassing market expectations of $23.44 billion.
  • Adjusted net income expanded around 30% to $1.22 billion, or $4.59 per share, but missed Street expectations of $4.64 per share.

Why it matters: Revenues of delivery firms, like FedEx and rival United Parcel Service, were boosted by strong ecommerce shipments amid the pandemic. However, unlike UPS, FedEx was unable to benefit significantly by the opportunity.

FedEx’s quarterly earnings were impacted by ongoing labour issues and restrictions related to Omicron. Despite labour woes starting to ease, volumes were softer-than-anticipated due to a spike in cases following the spread of Omicron. FedEx has said in January that it was facing a shortage of pilots and there were delays in its Express shipments.

“Our strong quarterly operating income increase was dampened by the surge of the Omicron variant which caused disruptions to our networks and diminished customer demand in January and into February,” CFO Michael Lenz said during the earnings call. Management also warned that the margins at the company’s Ground operations could miss internal forecasts in the second half of the year.

FedEx reiterated its December guidance of adjusted earnings between $20.50 and $21.50 per share for the full year. The company also named Chris Winton as its next Corporate Vice President, Human Resources. Winton will succeed Judy Edge, who will serve as an executive advisor until her official retirement on July 31, 2022.

How shares responded: FedEx’s shares fell 3.8% to $219.29 in after-hours trading, following the release of quarterly earnings. The stock has lost around 12% year to date.

What to watch: Investors will keep an eye on developments in the labour market. Markets will also monitor covid-19 cases, with infections rising in China and some European nations.

The markets today

European stocks will be in focus today ahead of a basket of economic reports from the common bloc

 

Context: European markets settled mostly higher on Thursday with investors reacting to the US Fed’s first interest-rate hike in years.

Details: Late Wednesday, the US Federal Reserve announced an interest rate hike of 25 basis points, representing the first upward revision in more than three years, and signalled six more rate increases in 2022. On Thursday, the Bank of England hiked interest rates for the third straight meeting, raising its benchmark rate by another 0.25 percentage points to 0.75%.

Investors continued to monitor the ongoing war in Ukraine, with reports of some progress in the ceasefire talks providing support to global stock markets.

Investors shrugged off news of that Eurozone’s annual inflation accelerated to a record high of 5.9% in February, from 5.1% a month ago. Rather, they focused on earnings results by several companies, including Audi, Veolia, and Deliveroo. Shares of Deliveroo climbed more than 6% on Thursday, after the company’s results showed robust growth over the past year.

The pan-European Stoxx 600 index gained 0.45% to close at 450.49 on Thursday, with oil and gas stocks leading the rally. The FTSE 100 was the top performer, gaining 1.3% to settle at 7,385.34, following the BoE’s rate hike decision. The CAC 40 added 0.36%, while DAX 40 slipped 0.36% on Thursday.

What to watch: Traders await economic data on balance of trade, labour costs and wages from the Eurozone today. The Eurozone, which recorded a trade deficit of €4.6 billion in December, is expected to report a €2.6 billion gap for January. Eurozone’s hourly labour costs are projected to increase 3% year-over-year, while wages are expected to rise 3.3% in the fourth quarter.

The ongoing Russia-Ukraine war will remain a major concern for traders. Markets will also monitor rising covid-19 cases in China and Europe.

Other Markets: US indices closed higher on Thursday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 1.23%, 1.23% and 1.16%, respectively.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD – 1.1082 and 1.1090 Negative
AUD/USD – 0.7371 and 0.7382 Positive
Nasdaq 100 – 14069.69 and 14133.91 Positive
Nikkei 225 – 26698.16 and 26757.16 Negative
Gold – 1934.86 and 1939.21 Negative

 

Market snapshot

What else to watch today

Italy’s balance of trade and construction output, Russia’s foreign exchange reserves and Central Bank of Russia’s interest rate decision, India’s foreign exchange reserves, Brazil’s unemployment rate, Canada’s retail sales, ADP employment change, foreign securities purchases and new home prices, as well as US existing home sales, CB leading index and Baker Hughes crude oil rigs.


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