Is FedEx’s lack of confidence a warning sign for the economy?

Stocks sold off yesterday as investors limped back to the markets from an extended holiday weekend. Recession potential nipped at the heels of neophyte bulls who are still closely watching the still angry, but resting Fed.

The longest day. Today is the summer solstice for the northern hemisphere (sorry southern hemisphere readers), which means that it is the longest day of the year. In New York, it will hardly feel like the first day of summer with overcast skies and lower-than-average temperatures. I don’t know about you, but every day seems like the longest day in the markets these days. I know, I know, if it were easy… Still, it has been a long time since the markets have experienced an all-thumbs-up swath of smooth sailing seas.

At the heart of those long days is the Fed and its brutal fight with inflation. Inflation is indeed the enemy of the consumer, but in its battle with inflation, ironically, we the consumers become the collateral damage of the Fed’s bombardments. Oh, and stock and bond investors got the worst of the pain. Ok, ok, so we all get it by now, this is the bitter medicine which we have to swallow in order to get back to that smooth sailing. We took it… um, are taking it still, so where are those calm seas?

I wrote about food inflation a few days back and how maybe, possibly how the coming of El Niño may be a mixed blessing for some highly inflated commodities. I have to say predicting the markets and the economy is tough enough, so I am smart enough not to add predicting weather to my list of vocations… or even avocations. So, I will leave that to the well-coifed TV personalities who seem to get it right enough times to keep us watching. With regard to that tough-to-predict-weather’s impact on food prices, I look to the USDA (US Department of Agriculture). Those folks are good enough to provide THOSE WHO ARE INTERESTED a weekly report of crop progress and conditions.

You may have seen that iconic 1983 comedy movie Trading Places which portrayed a parking garage exchange of an attaché case of cash for an early look at a crop report, but this morning I will save you the trip to the dark parking garage, the cash, and even having to go into your attic to find that 1980s-style briefcase. According to the USDA, current conditions of both Corn and Soybeans have deteriorated the most since 2012! The reason for the decline is lack of rain. The released number is actually a percentage of the crop rated “good to excellent” or G/E in trader-talk. What that really means is that corn and soybean yields are down. Lower supply means… you guessed it, higher prices. Corn and soybeans go into all sorts of things besides directly into your tummy. They are used for biofuel, livestock feed, and all types of other food-related additives. For some reference, Corn is around $6.58 / bushel which is cheaper than last year’s ~$8.00 peak, but nearly double the price of where it was in 2020. There is some good news in the report. Rice and Peanuts seem to be doing OK for now. But the worst news of all is that the Fed cannot control the prices of commodities with interest rate hikes and tough talk. Mother nature is in control of that. On the prices of most other things, we will hear what the Fed has to say about them today when Chairman Powell goes to Capitol Hill for his semi-annual testimony before the House Financial Services Committee. Similar to TV weather personalities, he will be well-coifed, pleasant and confident. Unfortunately, the Fed’s history of successful forecasting is not nearly as accurate as your favorite weatherperson’s. Be patient, sunnier days will eventually return… even I can predict that.

WHAT TO WATCH THIS MORNING

Tesla Inc (TSLA) shares are higher by +1.21% after Elon Musk announced that he has plans to expand in India. Additionally, rival automaker Rivian announced that it was joining big automakers in making its vehicles compatible with Tesla’s superchargers. Tesla will announce its Q2 earnings on 7/20. Potential average analyst target upside: -24.3%. WHY IS THIS NUMBER NEGATIVE? Because the stock is currently trading higher than median average price targets of analysts. While that can be interpreted as the stock being overpriced, it does not mean that the stock will not continue to climb as analysts potentially raise price targets.

FedEx Corp (FDX) shares are lower by -2.72% in the premarket after it announced a revenue miss for the past quarter. The company gave full year guidance that was lower than analysts’ expectations citing weak demand. Dividend yield: 2.17%. Potential average analyst target upside: +10.0%.

YESTERDAY’S MARKETS

Stocks fell yesterday as traders prepared to hear from the Fed today and housing numbers indicated that builders are not daunted by the Fed’s best efforts to collar them. The S&P500 fell by -0.47%, the Dow Jones Industrial Average declined by -0.71%, the Nasdaq Composite Index slipped by -0.16%, and the Russell 2000 Index traded lower by -0.47%. Bonds gained and 10-year Treasury Note yields gave up -4 basis points to 3.72%. Cryptos gained +4.32% and Bitcoin climbed by +5.43%. The S&P500 ESG Index declined by -0.43%.

NEXT UP

• Chairman Powell will speak before the House Financial Service Panel at 10:00 AM Wall Street Time. Analysts are expecting the Chairman to double down on his hawkish jawboning today.