FedEx just gave us good news about the economy

The bellwether stock soared double-digits after a stellar earnings report

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Good morning! Tuesday marked the fourth trading session in a row that the Nasdaq Composite (📈) and the Dow Jones Industrial Average (📉) moved in opposite directions.

The S&P 500, meanwhile, ticked higher — and it’s now gone 337 trading days without a 2% drop.

On deck today: What FedEx earnings say about the economy, Rivian’s 49% stock rally, and record housing prices.

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The ‘old economy’ is humming along

Every quarter, investors and market-watchers of all stripes tune in to FedEx earnings. 

Tuesday evening, they were not disappointed. 

FedEx reported an upbeat outlook and the stock shot up as much as 16% after hours. 

“To see FedEx jump again after earnings is a step in the right direction [for the economy],” said Jay Woods, chief global strategist at Freedom Capital Markets. 

The parcel delivery giant reported earnings per share of $5.41 for the quarter ending May 31, above expectations for $5.34.

FedEx sees adjusted earnings for the coming fiscal year will fall between $20 and $22 a share, comfortably sandwiching analysts’ estimate for $20.92.

“We made significant progress in fiscal 2024 and ended the year strong, delivering four consecutive quarters of expanding operating income and margin in a challenging revenue environment,” FedEx CEO Raj Subramaniam said in a statement.

“These results are unprecedented in this current environment.”

The shipping company is a key player in the so-called “old economy.” Its ties to global commerce, freight volumes and logistics makes it a closely-watched economic bellwether. 

Executives said FedEx would buy back $2.5 billion of its stock over the next year as the company consolidates various components of the business.

Indeed, the company has been rolling out cost-cutting measures and intends to keep doing so.

But even with the latest rally, the stock remains roughly flat on the year. In April, it lost a key contract to UPS for the US Postal Service that led to a steep decline in its share price.

While FedEx earnings on their own indeed provide clues to the state of the economy, Woods told me the portrait fills out when you tie in Carnival, General Mills, and Nike — all of which report quarterly results this week. 

Together, that batch represents consumer staples, transportation, travel, and retail. 

Like FedEx, Carnival’s strong earnings early Tuesday sent the stock more than 8% higher.

So, two of the four names have already given investors reason to cheer. 

“Transports have been one of the most beaten down sectors, but to see them get a lift from FedEx means things are starting to turn,” Woods said.

“And to see consumers still traveling too is phenomenal — the consumer seems to be resilient and still spending.”

General Mills reports today, and Nike is due Thursday.

“Everyone has been so tech-focused,” Woods said. “Now we're starting to see it broaden out, it’s not a bad thing going into the second half of the year.”

How much weight do you give to FedEx as an economic bellwether in the current landscape? Hit reply to this email or let me know on X @philrosenn.

*At a glance:

*Data as of Tuesday 11 p.m. ET

Elsewhere:

🖥️ Nvidia stock rallied to end a 3-day losing streak. Shares climbed more than 5% on Tuesday to curb the nearly half a trillion dollars in market value of losses over the last week. By the close of trading on Tuesday, the company remains below the valuations of Apple and Microsoft. (Yahoo Finance)

🏦Fed Governor Lisa Cook sees rate cuts “at some point.” But the timing of those adjustments remains up in the air, even though she expects inflation to continue cooling into 2025. To Cook, the rising delinquency rates “are not yet concerning for the overall economy but bear watching.” (Reuters)

⚡️Rivian stock climbed 49% late Tuesday night. The move followed news that Volkswagen plans to invest up to $5 billion into the EV maker. The two companies intend to pursue a join venture as part of a software-development partnership. VW also intends to take a $3 billion stake in Rivian. (WSJ)

🏠️US home prices are climbing at a slower pace. That said, the national level for prices remains at a record high, according to S&P CoreLogic Case-Shiller data. For the month of April, home prices are up 6.3% from a year ago. (Bloomberg)

Rapid-fire:

  • US consumer confidence fell this month but remained within the narrow range seen over the last two years (Bloomberg)

  • The EU has charged Microsoft with antitrust violations over its video conferencing app (FT)

  • Amazon is building something to rival ChatGPT (Business Insider)

  • Tesla has recalled more Cybertrucks to fix windshield wipers and other issues (CNBC)

  • The SEC accused two former executives of pumping a deal that would punish short sellers of a Texas oil company (WSJ)

Last thing:

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