More Warnings Issued After FedEx CEO Says Global Recession Looms

A FedEx truck hauling three trailers was a common sight on the Interstate 15 in Utah on June 29, 2022. (Allan Stein/The Epoch Times)

Wall Street’s main indexes hit two-month lows on Friday after a warning from the head of FedEx about a looming worldwide recession.

The benchmark S&P 500 fell below the 3,900 mark, seen by many traders as a key support level, stoking speculation that there could be more selling in equity markets. As of mid-Friday, the Dow Jones fell more than 300 points.

Shares of FedEx plunged 22.9 percent and were on pace for their worst day on record after the company said a global demand slowdown accelerated at the end of August and predicted that it would worsen in the November quarter.

The firm said this week it will fall $500 million short of its revenue target—its biggest drop since at least 1980. Because of FedEx’s role as a global shipping company, some took the development that global demand is slowing, which could signal a recession.

During an interview with CNBC, FedEx CEO Raj Subramaniam was asked if he thinks a recent slowdown in FedEx’s business is a sign that a global recession is brewing.

“I think so,“ he said. ”But you know, these numbers, they don’t portend very well. I’m very disappointed in the results that we just announced here, and you know, the headline really is the macro situation that we’re facing.”

In a statement, Subramaniam noted that “global volumes declined as macroeconomic trends significantly worsened later in the quarter” and that “given the speed at which conditions shifted, first quarter results are below our expectations.”

Warnings

“The FedEx warning came as a slap. It’s a solid sign that the economy started slowing,” Ipek Ozkardeskaya, a senior analyst at Swissquote, told Bloomberg. “This is certainly the first in a series of warnings that we may see for the quarters to come.”

Deutsche Bank also released a statement to clients about FedEx’s update.

“FedEx preannounced last night the weakest set of results we’ve seen relative to expectations in our ~20 years of analyzing companies,” the bank’s analysts warned in a note, according to news reports.

“The FedEx news was pretty stark,” Carl Riccadonna, the head U.S. economist at BNP Paribas, told MarketWatch. But that development is consistent with a “massive deceleration” within the U.S. economy, he said.

A recent consumer price index report, a key measure of inflation, showed that year-over-year inflation was higher than expected. The news rattled the Dow Jones Industrial Average and sent shares tumbling by 1,200 points on Sept. 13.

In recent months, the White House has been reluctant to use the term “recession” and instead has pointed to underlying strength in the job market. An economic downturn would pose a problem for the Biden administration and Democrats heading into the 2022 midterm elections.

In July, Federal Reserve Chairman Jerome Powell was asked whether he believed the U.S. economy was heading toward a recession. He responded by saying that it’s not because “there are too many areas of the economy that are performing too well.”

Reuters contributed to this report.