Shares of FedEx (FDX, $86.49, down $1.05) are trading lower today after the company warned after the bell on Tuesday that if would miss current estimates for the upcoming quarter. FedEx now expects to post a profit of $1.37-$1.43 versus its earlier forecast for $$1.45-$1.60 a share. Wall Street’s expectations called for $1.56 a share, on average.
There are still some companies reporting earnings for the April-June period which started in July which and can last through mid-September. Usually, companies wait until the back-half of the last month for the current quarter (late March, June, September and December) to announce warnings or earnings misses. FedEx felt it needed to deliver this news right away which means they must not have much faith that revenues will be picking up. Perhaps they will when the holidays roll around.
This was not good news for the Transportation sector or the Dow Transports which we mentioned were coming into the week at crucial levels. Here is the chart we drew up in the sand over the weekend:
Here is what it looks like today:
We said the Dow Transports (and the Financial sector) would have to show some legs to power the next rally and today’s FedEx warning was a slight setback. The stock has bounced off its lows and the above chart shows the bottom channel of support holding for the Dow Transports so these are positive signs. Two more warning signs to add to the bears checklist for a lower market would be FedEx closing below $85 and the DT’s closing below 4,950 somewhere down the road.
As far as the market, rumors are swirling on what the European Central Bank (ECB) will say on Thursday and Friday we get the U.S. Nonfarm payroll numbers. Besides the possible Europe news, Thursday will be a big day for employment numbers as Challenger Jobs Cuts (7:30am), ADP Employment Change (8:15am) and Initial/ Continuing Claims (8:30am) are all due out before the opening bell. At 10am, ISM Services will be announced.
We would expect when we go to press Friday afternoon, the landscape could be totally different in 48 hours with either the bears pushing the next wave of support or the bulls looking at a jailbreak.
Currently, the Dow is 33 points to 13,069 while the S&P 500 is higher by a point to 1,406. The Nasdaq is advancing 4 points to 3,079.
We have much more to talk about inside our Members Area so let’s get to it. We will be back in the morning with our next update but stay ready over the next 2 days for some fireworks.