What Happened This Week: FedEx, The ‘Merge’ And Some Mighty Big Losers

  • Stock Market Analysis

There is bad news. And there is #$&%!?!-the-stock just-took-a-22%-dive bad news.

That was the kind of week it was for shareholders of FedEx (NYSE: FDX ).

Is the description a little too graphic for you? Well, then how about: FedEx stock saw its biggest drop in more than 40 years on Friday. Yes, that is how bad it was.

FedEx Weekly Chart

Source: Investing.com

But what is worse, is that the U.S. package-delivery service has for some time now been recognized as a bellwether performer for the broader American economy. So now is the time to be careful – very, very careful. Keep an eye on other delivery-related firms – like United Parcel Service Inc (NYSE: UPS ) and Amazon (NASDAQ: AMZN ). Both these stocks ended the week down.

But let’s take a look at what happened this past week to FedEx and what it could mean for the overall outlook for the U.S. economy, which is experiencing a major shift as consumers focus on services and experiences in the post-pandemic period and away from goods, which they had been buying throughout the COVID lockdowns.

When FedEx unveiled its latest earnings last Thursday, it revealed what one analyst aptly described as “an ugly quarter.”

The results did not just miss what analysts were forecasting, they fell devastatingly short of the anticipated mark. And looking forward, it withdrew its outlook, sending the very clear message that the bad news is not about to subside. Oh, and the reasons for all this gloom and doom is not because of what is happening in one market, it’s what is happening in major markets around the globe, like Asia and across Europe.

But the market’s drastic reaction that tanked FedEx’s stock, has more to do with the company’s drastic action given its predicted continued downturn. Like any accident scene, it is hard to ignore when emergency first-aid is administered right there in front of everyone for all to see. That is what it was like when the company said it would begin immediately to cut costs – slashing employee hours, grounding planes and closing about 90 of its 2,200 offices.

But more harsh medicine will be needed, as the company stated:

“While continuing aggressive cost reduction actions, the company expects business conditions to further weaken in the second quarter."

The cautionary tale for investors is to realize that events do not happen in a vacuum. And they should listen when they hear things like when victims of these events speak. In this case, when FedEx says “the company expects business conditions to further weaken,” look around. Watch the stock performance of major retailers. They will be the principle measure reflecting how consumers have satiated their appetites for buying stuff. Shares of both Target (NYSE: TGT ) and Walmart (NYSE: WMT ) this past week were both down.

Beyond The Merge

Another lesson from the past week: A full serving of hype is best paired with a qualified glass of skepticism.

Because, after all, what is hype? It’s nothing but talk, chatter, buzz. You need something to balance all those empty calories.

In fact, investors who went hard before the Ethereum Merge needed a stiff drink by the time Friday rolled around.

Ethereum Weekly Chart

Source: Investing.com

The second-largest cryptocurrency by volume completed its much-talked about ‘Merge’ on Thursday. The term refers to the upgrade of the crypto’s network that will now employ a less energy-needy technology.

According to the hype that had been building for months, the improvement had the potential to boost Ethereum’s value. You could say, the logic behind this theory is the same as the one that real estate agents often espouse: Upgrading the plumbing in a house increases the property’s overall value.

But real estate has nothing to teach cryptos.

Once the Ethereum Merge was complete, everyone seemed to finally recognize that all the talk surrounding it was just that – empty-calorie hype. Investors need to wait till something substantial changes in the sector.

Top Winners And Losers Of The Week

Again, for all those out there who are keeping score, here are the top gainers of the past week:

On the S&P 500

Royal Caribbean Cruises (NYSE: RCL ): +6.77%
APA Corporation (NASDAQ: APA ): +6.22%
Norwegian Cruise Line Holdings (NYSE: NCLH ): +4.93%
Humana (NYSE: HUM ): +4.48%
Wynn Resorts (NASDAQ: WYNN ): +4.21%

On the NASDAQ Composite

Dawson Geophysical (NASDAQ: DWSN ): +76.99%
ZW Data Action Technologies (NASDAQ: CNET ): 47.49%
Old Point Financial Corporation (NASDAQ: OPOF ): +20.72%
Live Ventures (NASDAQ: LIVE ): +18.52%
Cumberland Pharmaceuticals (NASDAQ: CPIX ): +16.89%

And the biggest losers:

On the S&P 500

Adobe Systems (NASDAQ: ADBE ): -24.10%
FedEx (NYSE: FDX ): -22.95%
Nucor (NYSE: NUE ): -18:45%
WestRock (NYSE: WRK ): -16.32%
Generac Holdings (NYSE: GNRC ): -15.95%

On the NASDAQ Composite

Color Star Technology (NASDAQ: CSCW ): -39.39%
Omeros (NASDAQ: OMER ): -34.39%
TROOPS Inc (NASDAQ: TROO ): -33.51%
Adobe Systems (NASDAQ: ADBE ): -24.10%
China Jo-Jo Drugstores (NASDAQ: CJJD ): -22.71%

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