US stocks fell on Friday after FedEx gave investors a brutal pre-earnings announcement about the state of the global economy.   

  The Dow closed 140 points, or 0.5%, lower.  The S&P 500 fell 0.7% and the Nasdaq Composite fell 0.9%.   

  All three major indices posted their fourth losing week in the last five.  The Dow fell 4.1% for the week, and the S&P 500 and Nasdaq fell 5% and 5.5%, respectively.   

  Shares of FedEx ( FDX ) fell nearly 22% after the company withdrew its full-year guidance late Thursday and warned that a slowing economy would cause it to fall $500 million short of its revenue target.  The weakening global economy, particularly in Asia and Europe, has hurt FedEx ( FDX ) ( FDX ) courier operations.  The company said demand for bundles weakened significantly in the final weeks of the quarter.   

  During an interview Thursday on CNBC, FedEx CEO Raj Subramaniam was asked if he believes the slowdown in his business is a sign of the start of a global recession.   

  “I think so,” he replied.  “These numbers don’t look very good.”   

  That marks FedEx’s worst one-day drop in history — surpassing the 16% plunge on the day of the stock market crash in 1987. The Dow also fell more than 5% in Friday trading, and FedEx rival UPS ( UPS ) also fell about 5%.   

  Transportation stocks are considered a leading indicator for the market in general, and FedEx in particular is considered a market leader.  The announcement could contribute to broader declines in a market already headed for a week of heavy losses.   




  Either way, the third-quarter reporting period begins next month, and FedEx’s warning adds to analysts’ bearish outlook on earnings expectations.   

  Estimates for third-quarter earnings per share have fallen more than 5.5% since late June, according to FactSet data.  This is the biggest drop for a quarter since the second quarter of 2020 (when Covid-19 plunged the United States into recession).   

  FedEx’s announcement also comes as investors worry about a weakening economic outlook as the Federal Reserve aggressively raises interest rates to bring inflation under control.   

  A preliminary reading of the University of Michigan’s consumer sentiment index for September added to investor woes on Friday, coming in at 59.5, its highest level since April but below economists’ estimates.  The September survey showed that respondents do not expect high prices to disappear soon, with consumers saying they expect inflation to reach 4.6% over the next 12 months and 2.8% over the next five years.   

  That’s bad news for investors, as expectations can be a self-fulfilling prophecy: If consumers expect prices to stay high, they’ll likely spend more and demand higher wages, while businesses may raise prices to cover higher demand and wages.  If expectations are lower, they may rein in spending and ask for smaller wage increases.   

  Friday’s consumer sentiment report is the last major piece of economic data before the Federal Reserve meets next week to discuss monetary policy and determine whether to raise interest rates once more in its battle to tame the inflation.   

  However, most of this week’s market loss came on Tuesday after the key measure of inflation, the August consumer price index report, came out.  The Dow lost 1,200 points on the news – its worst drop since June 2020.