The Dow Jones Index Stumbles As FedEx Earnings Snuffs Out Fed Rate Cut Excitement

Summary:
• The Fed's 50 bps cut is welcome, but was the timing right? The answer to this question will be moving the Dow Jones Index for days to come.

The Dow Jones Index edged lower on Friday as weak earnings data by delivery and logistics giant, FedEx reported weaker-than-expected earnings. The DJIA rose to a historical high of 42,169 points on Thursday on renewed confidence in the markets following the Federal Reserve’s decision to slash interest rates by 50 basis points on Wednesday.

However, at the time of writing, the Dow Jones Index (INDEXDJX: .DJI) was down by 0.2 percent in the first hour of the New York session. The decline was precipitated by the FedEx Q1 FY 2025 earnings which came in at $21.6 billion, missing the forecast estimate of $21.87 billion. In addition, the company’s EPS fell to $3.60 versus $4.55 earned in the corresponding quarter last year.

FedEx’s performance has often been used to gauge the health of the US economy, and a 3% decline in US shipping volume in the reporting quarter does not augur well. In addition, the company gave a gloomy growth outlook, narrowing its guidance for the fiscal 2025 to low single-digit rise.

Furthermore, FedEX pointed to low demand for speedy delivery services, and highlighted falling shipping volumes from manufacturers, signaling potential underlying problems in the wider US economy. The news spooked investors, sending FedEx share price down by more than 15 percent at press time.

While there was initial excitement about the Fed’s deep cut, a bearish undercurrent persists in the US stock markets. There are concerns that the Fed could have intervened too late when the job market is already strained, and manufacturing weakened significantly.

Weak FedEx earnings will certainly shift focus to the timing of the rate cut. Furthermore, the deep cut is interpreted as a panicky damage control move. Therefore, US economic data released next week will be analysed in the context of the silent message in the Fed’s deep cut. The highlight will be the US Q2 GDP figure, but the Dow Jones Index will also have to weigh the August Durable Goods Orders and September S&P Global Manufacturing PMI data.

Dow Jone Index today

The DJI will likely continue the downside if action stays below 41,927, with initial support likely to be at 41,841. However, extended bearishness could breach that support and send the index lower to test 41,768.

On the other hand, the sellers will have the upper hand above 41,927. The bullish momentum will encounter the first barrier at 41,979. However, if they manage to go above that mark, the downside narrative will be invalid, and the Index could rise further to test 42,060.