Morning Report: FedEx profit warnings spooks the markets

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Stocks are lower this morning after economic bellwether FedEx withdrew its guidance based on a deteriorating economy. Bonds and MBS are down.

FedEx stock is down some 23% this morning after it issued a profit warning. Note that Fed Ex is on a May fiscal year. “Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S. We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first quarter results are below our expectations,” said Raj Subramaniam, FedEx Corporation president and chief executive officer. “While this performance is disappointing, we are aggressively accelerating cost reduction efforts and evaluating additional measures to enhance productivity, reduce variable costs, and implement structural cost-reduction initiatives. These efforts are aligned with the strategy we outlined in June, and I remain confident in achieving our fiscal year 2025 financial targets.”

It looks like the rate increases are beginning to be felt, and we will be seeing more of this. FedEx is kind of an economic canary in the coal mine. It looks like the Fed’s rate hikes are gaining some traction.

Consumer sentiment improved in September, according to the University of Michigan Consumer Sentiment Survey. Most notably, the median expected inflation rate declined to 4.6%, the lowest reading in a year. The Fed pays close attention to this number because inflationary expectations are a critical input into inflation. Inflation uncertainty is the highest it has been since 1982 however, which is a concern.

The rise in interest rates this year has caused MBS spreads to widen considerably. MBS spreads describe the difference between the mortgage rate and a Treasury of similar maturity. When MBS spreads are large (aka “wide” in trader parlance) it means that mortgage rates are high relative to underlying interest rates. This describes the current state of affairs, as MBS spreads have widened considerably this year. We are at 10 year highs (setting aside the short spike in the initial days of COVID).

51 Responses

    • That kind of grifting know no party.

      Trump has plenty of grifting going on. So do many Republican PACS. And politicians. And the RNC. Grifting is what they do best.

      Not sure how pols lining their pockets benefits us but you don’t have to worry about it, they grift just fine.

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  1. So it seems like the Dems have a real taste now for using the levers of law enforcement against their political opponents, and they want more.

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    • Like

      • OMFG. The replies.

        “Isn’t that a crime? Luring people on to a bus and taking them somewhere is a crime, right? Imagine someone lured elderly people on a busy and left them in a city far away … “

        I mean, honestly. WTF is wrong with these people?

        It’s like you guys have said: anything that happens we don’t like should be criminally prosecutable.

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        • anything that happens we don’t like should be criminally prosecutable.

          That is why it is a running joke that the left thinks everything it dislikes should be banned and everything it likes should be mandatory and subsidized by the government.

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    • And:

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      • As Reagan once said (though by mistake in his case), “Facts are stupid things.”

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      • I suppose it is good that even someone who thinks that what DeSantis and Abbott are doing is “trollish and inhumane” can recognize that there is no crime involved. But seriously…”trollish and inhumane”? The idea that what they are doing is “inhumane” is such an obviously moronic and false characterization that it doesn’t even bear addressing. And while I understand where the notion that it is “trollish” comes from, that isn’t really any more accurate.

        Being put in a position to have to put up or shut up, of having to demonstrate rather than just proclaim your own self-professed values/virtues, is not an instance of being “trolled”. It is being invited to put your money where your mouth is. This is not a troll, but is instead a serious and perfectly understandable policy initiative. And from the perspective of both DC and Massachusetts as self-proclaimed “sanctuary” locations, one would think it would be a desireable policy initiative. That it is not is actually quite informative, and tells the voting electorate a great deal about what these progressive politicians actually think.

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        • What’s fascinating is that if these illegals (right now, literal “wetbacks”) do not have a sponsor they are kept under bridge overpass camps until the government processes their claims which can take weeks/months. So, to alleviate the crowding the Feds have been shipping them out for, well, years now. I suppose living under bridges throughout the summer on the Texas/Mexico border is more humane to some people. From my perspective we should take the Edward Abbey approach which is to meet them at the border, provide them weapons and condoms and send them back.

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        • “And while I understand where the notion that it is “trollish” comes from, that isn’t really any more accurate.”

          In this case I think it fits given that DeSantis didn’t transport migrants that started from Florida, but had to go to Texas to get them just for this stunt.

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        • jnc:

          In this case I think it fits given that DeSantis didn’t transport migrants that started from Florida, but had to go to Texas to get them just for this stunt.

          Where have you seen that? I saw DeSantis speak about this the other day and from my understanding these people were already in Florida.
          I don’t know how these specific 50 people got to Florida, but I do know that the Federal government itself has relocated illegals into many states, including Florida. So whether or not he actually did go to Texas to get them, he certainly didn’t “have” to do so.

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        • This is also where it becomes an indefensible stunt, when DeSantis tacks on things like this:

          I think Abbott has done a better job. He should just have regular charter buses that run once a week to DC, New York City and Chicago.

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        • jnc:

          Was that brochure produced by Florida or Massachusetts?

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        • The left is going to argue it is trollish no matter what DeSantis does.

          I wouldn’t worry about being defensible or not. It will be called indefensible by the left no matter what.

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        • Brent:

          I wouldn’t worry about being defensible or not. It will be called indefensible by the left no matter what.

          Good point.

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        • “Where have you seen that?”

          “Migrants in San Antonio lured onto Massachusetts flights with false promises of housing and jobs

          Florida Gov. Ron DeSantis’ administration orchestrated the private flights to Martha’s Vineyard, offering work and free rent. Advocates plan to pursue legal ramifications for those involved.

          by William Melhado and Jinitzail Hernández, The Texas Tribune, and Alexander Thompson and Randy Vazquez, The Boston Globe Sept. 16, 202210 PM Central ”

          https://www.texastribune.org/2022/09/16/migrants-texas-massachusetts-ron-desantis/

          Flights took off from Texas, supposedly landed in Florida for a layover for some reason, then went on to Martha’s Vineyard.

          “Was that brochure produced by Florida or Massachusetts?”

          Supposedly handed out by the woman soliciting the migrants in Texas for the flights to Mass.

          My guess would be it was produced by whomever was organizing the whole stunt in the first place.

          As noted in the piece, the promised benefits aren’t applicable to these migrants.

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        • jnc:

          Interesting that the very migrant who provided most of the first person accounts in the story suggests (in the last paragraph, natch) that he is regretting not taking up the offer to go to Martha’s Vineyard.

          That said, if it is true that DeSantis is not sending his own illegal immigrants, but is reaching out to Texas to get them, then I agree with you…it is a troll, and Abbott is doing it better.

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        • I’m curious with the belief that Abbott is doing it better – who is dominating the media? I’d say it’s DeSantis, not Abbott. I’d say DeSantis captured the zeitgeist.

          I really don’t like Abbott so that may be clouding my judgement. That said, I like Abbott’s approach but it really hasn’t captured the public mood quite like DeSantis’s chartered flight has.

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        • McWing:

          I’m curious with the belief that Abbott is doing it better

          By better I just meant it was more justifiable as policy by a state governor. It is hard to justify on policy grounds using Florida state funds to move people from Texas to Massachusetts. Especially when Texas is already doing it itself, with its own funds.

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        • I know no actual data but it’s my understanding he’s doing it under a program created by Florida Democrats at some point? So he at least has a legal basis.

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        • KW:

          I know no actual data but it’s my understanding he’s doing it under a program created by Florida Democrats at some point?

          I believe that the Florida legislature created a budget item, I think it was $12mm, specifically designated to be used by the governor towards addressing the illegal immigrant issue in Florida, and this is what the Dems in the legislature voted for. I don’t know whether the $12mm was explicitly apportioned for relocating illegals, but even if it was I’m sure the Dems who voted for it can easily (and reasonably) argue that it wasn’t apportioned for the purposes of relocating illegals from states other than Florida itself.

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        • Probably not.

          On the plus side this is a battle DeSantis needs to be able to fight and win. Irrespective of his using the government in a manner about 1/10th as inappropriate or self/serving as the left does with every political action they take, the attacks on DeSantis are intended to keep him from being president or gaining any more cultural power than he already has. He has to be able to both survive the attacks and at least appear to come out a winner.

          I get the complaint that he transported illegal aliens in another state, I feel like that’s a legit complaint. Although I will expect there’s more to it and until I see decisive evidence there isn’t. But the rest of it (they are technically here legally because they claimed asylum, the law exempt people fleeing communism) seems weak to me, and certainly not the angles to pursue in terms of the public PR battle. If he had a good answer to the “imported illegal aliens from Texas” question, I think he will be fine.

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        • “I wouldn’t worry about being defensible or not. It will be called indefensible by the left no matter what.”

          No reason to give them an actual basis.

          Like I said, I think Abbot is doing a better job here with the free bus rides. DeSantis felt left out in terms of progressive outrage and is playing catch up.

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        • The memes are probably worth it. Nothing irks progressives more than being mocked, and DeSantis provided excellent fodder.

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        • “So whether or not he actually did go to Texas to get them, he certainly didn’t “have” to do so.”

          He was noting the other day that they have stopped coming to Florida. Hence the need to go out of state this time.

          “DeSantis: Florida not busing immigrants because Biden stopped sending them

          Gov. Ron DeSantis has tied the busing proposal to his broader immigration fight with President Joe Biden.
          Immigrants prepare to board a Border Patrol bus.

          By Matt Dixon

          08/23/2022 03:11 PM EDT

          TALLAHASSEE, Fla. — Gov. Ron DeSantis’ administration has not yet started busing undocumented immigrants from Florida to other parts of the country, in part, he says, because the Biden administration has stopped sending them.”

          https://www.politico.com/news/2022/08/23/desantis-florida-immigration-biden-00053322

          So, yes this incident is pure trolling on his part. He had to go get the migrants from out of state to ship them to Martha’s Vineyard because the original problem he had complained about had stopped.

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        • “I’m curious with the belief that Abbott is doing it better – who is dominating the media? I’d say it’s DeSantis, not Abbott. I’d say DeSantis captured the zeitgeist.”

          As a pure trolling exercise to grab media attention and cause progressive outrage you are right.

          But I think Abbott’s approach is more sustainable and cost effective.

          I’m also assuming that this won’t actually change anything at the Federal level.

          Edit: I also think Abbott’s approach was more effective messaging wise because it actually caused the mayor of DC to declare an emergency and call out the National Guard. In contrast, Martha’s Vineyard actually dealt with the immigrants in a manner that progressives and Democrats were proud of so it didn’t play the same way to the intended audience. Also Massachusetts has a Republican governor.

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        • A couple of things, sustainable isn’t the correct metric as the goal is to change Federal policy, in that, DeSantis’s tactic is more likely to affect Fed policy. Also, what lefties declare versus what Biden’s internal polling is showing I believe are two very separate things. Illegal immigration has not been particularly covered well outside of the rightwing bubble but DeSantis forced the topic into the mainstream and I suspect that it’s these kind of tactics, that expose the lie of a “secure border” are the one’s that affect Fed policy. As for MA’s Republican governor, I’m not sure of your point.

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        • “DeSantis’s tactic is more likely to affect Fed policy.”

          I disagree.

          A. I don’t think it’s going to matter vis-a-vis Federal policy.
          B. Abbott is splitting the Democrats whereas DeSantis is uniting them. I posted a few pieces from the NYT on the next topic that illustrate that. The point of a good trolling is to induce the people you are trolling to fight amongst themselves.
          C. A one time transport of 50 migrants doesn’t matter. That’s about getting DeSantis praise on Tucker Carlson and positioning him for the Republican presidential primaries in 2024.

          If there’s any chance of changing policy it will be because Abbott can send a steady stream of migrants to DC, New York, Chicago, etc indefinitely so those mayors will have to do something because they can’t stop it. Which puts them in the same boat as Texas vis-a-vis asylum seekers, etc. which is the whole point policy wise (to the extent one cares about actually changing the policy).

          “As for MA’s Republican governor, I’m not sure of your point.”

          It complicates the narrative if it becomes a Republican vs Republican fight.

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        • A. I don’t think it’s going to matter vis-a-vis Federal policy.

          Certainly not in the short term but I believe DeSantis’s action is an inflection point (just to further abuse an already abused phrase). If the D’s get shellacked in the House it will be pointed to as one contributing aspect. I do not believe that Abbott or Doocey’s actions have created an inflections point. If the newly Republican House works it correctly, as in, leverages must pass Federal legislation to enforce border law, we’ll then say DeSantis had more of an impact.

          B. Abbott is splitting the Democrats whereas DeSantis is uniting them. I posted a few pieces from the NYT on the next topic that illustrate that. The point of a good trolling is to induce the people you are trolling to fight amongst themselves.

          I don’t think that this so called uniting will result in increased Democratic turnout in the midterms so I don’t think it matters, ultimately.

          C. A one time transport of 50 migrants doesn’t matter. That’s about getting DeSantis praise on Tucker Carlson and positioning him for the Republican presidential primaries in 2024.

          Certainly the online right, including Tucker and the whole of Fox News, including those at Redstate, HotAir and Townhall prefer DeSantis and hype his every action as heroic and “The Way it Should be Done”. I don’t trust DeSantis however, to do the things that I want and to push a Republican Congress to do the things I want. I don’t think he can harness Republican base efforts to get a Republican Congress to risk it’s majority nor do I think he’d risk his Presidency on anything. With that said, if he’s the nominee I’d vote for him.

          f there’s any chance of changing policy it will be because Abbott can send a steady stream of migrants to DC, New York, Chicago, etc indefinitely so those mayors will have to do something because they can’t stop it. Which puts them in the same boat as Texas vis-a-vis asylum seekers, etc. which is the whole point policy wise (to the extent one cares about actually changing the policy).

          I think their vocalizations are about having the Federal government shovel money at them, which I’m sure works, but will not, in the end, cause an increase in Democratic turnout in the midterms. I certainly support sending them there and elsewhere but it won’t change federal policy.

          As for the Republican governor, undoubtedly an R governor will renounce any Republican policy I support and the Hawt R on R action over any Republican action exists and is highlighted by the online left media. However I don’t think it gets more D’s to the polls at the midterms nor do I think it gets more R’s to stay away from the polls so in the end I think it has no impact.

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        • I think DeSantis is uniting the Democrats against him because they correctly recognize him as a threat. He’s basically a smarter and more effective Trump, politically. When challenged he has good arguments and facts on hand. He’s compelling and good at debating and isn’t 80 years old. He can articulate many conservative positions effectively, in ways independents can understand which is something Trump could never do. He recognizes traps and isn’t impulsive the way Trump was. Even things he does I disagree with … I get his argument. And I don’t think he’s just doing it to score points.

          He’s the only Republican I think has a prayer of being an effective president if elected. The only one who I think understands how insane the left would go and would have strategic responses prepared. And could get things done behind the scenes as well.

          But would I rather have DeSantis green lighting a pipeline and American oil exploration and articulating a cogent argument for why America should be energy independent … than Trump doing it? Yes.

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        • “I don’t think that this so called uniting will result in increased Democratic turnout in the midterms so I don’t think it matters, ultimately.”

          Maybe. DeSantis certainly has united them more than Abbott.

          But of course, they all pale in comparison to the Great Satan himself, Trump.

          Hence the need to get Trump back in the news so that they can run against him instead of on their record.

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        • Maybe. DeSantis certainly has united them more than Abbott.

          But will it increase D turnout in the midterms? I don’t think it will.

          Hence the need to get Trump back in the news so that they can run against him instead of on their record.

          The Democrats were always going to make the midterms about Trump. Interestingly, Trump is running ahead of all the Republican candidates in the midterms. There is a good argument to make that the more the Democrats make the election about Trump the more likely it is that the Trump coalition voters turnout and vote Republican.

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        • “I know no actual data but it’s my understanding he’s doing it under a program created by Florida Democrats at some point?”

          It’s from the 2022-2023 Florida state budget that was enacted. Florida has Republican majorities in both houses of the state legislature.

          I don’t think this was an old program that was previously created by Florida Democrats.

          https://www.cbs8.com/article/news/verify/immigration/florida-governor-desantis-12-million-program-transport-migrants-fact-check/536-7cb8159b-79c4-4f43-9c78-0fa009d9d2f5

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        • jnc:

          I don’t think this was an old program that was previously created by Florida Democrats.

          I think the claim is that Florida Dems voted for it, not that they created it.

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        • I gotcha. It’s been characterized as something Democrats did on right-leaning podcasts I’ve listened to.

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    • Gavin Newsom has the temperament of a contemporary Stalin so yeah this doesn’t surprise me. It’s also his jockeying for the dem nomination in 2024 if possible, or 2028 if he has to wait.

      But sure that’s nothing compared to was a president Newsom wouldn’t attempt. He’d be like our own Justin Trudeau. So let’s hope that never happens.

      The real problem is this sounds perfectly

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  2. The right will never succeed without this level of grifting.

    This is how it’s done, y’all.

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  3. Leaving aside one’s view of the motives, it appears to me that the people that DeSantis transported to Martha’s Vineyard are actually materially better off now than if they hadn’t gotten on the flights.

    Interesting that this isn’t even considered in the reporting.

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    • Nor is the fact that literally millions are coming in a wide open border. If Democrats do not consider this open borders, then I wonder what they do consider open borders.

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    • It also isn’t mentioned that generally the immigrants are volunteers. They might not entirely understand what they are volunteering for but still it’s not like they are being grabbed and good is being thrown over their head.

      A number of the immigrants so moved have been interviewed locally and have been entirely happy about being taken to a sanctuary city. They have to struggle to find anyone with a complaint (although of course they do).

      Finally the immigrants are here illegally. I find it ironic people are wishcasting Abbot and Desantis’s stunt into being illegal while ignoring the fact that the immigrants themselves are hear illegally and the legal alternative is to deport them.

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      • “Finally the immigrants are here illegally. ”

        That’s actually being adjudicated. I think most of these turned themselves in and made asylum claims and then were released by Homeland Security. They are actually eligible for work permits in 150 days I believe. If, as reported they are from Venezuela then the asylum claims may have more merit than most.

        Part of the issue is that many have figured out the asylum loophole and are exploiting it.

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  4. Putin Strikes Again!

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    • So much wrong with this. Including the avoidance of obvious questions and the built in assumption they are just reporting facts because they want it to be facts. No discussion of the fact that very little or what they are saying can be verified with 100% veracity.

      “They posed as resentful trans women, poor women and anti-abortion women. They dismissed the marchers as pawns of the Jewish billionaire George Soros.”

      And that. Maybe they were just real people saying that stuff. 70+ million people voted for Trump. Did they really need Russian trolls to tweet about George Soros. And there are real resentful transwoman?

      And whose elevating those narratives more that the NYT and WaPo and NPR and MSNBC? And then conservative media. Are we supposed to believe NYT and WaPo and NPR and also the Daily Wire and The Blaze are all Russian disinformation campaigns?

      But I think I’m halfway in and I haven’t seen any effort to address the many problems of Linda Sasour or the real reasons various parties might have and had and do have real grievances, not to mention the real schisms between black feminists and trans activist and regular old men-hating feminists and the fact far more of that comes out of American and European academia than out of Russia.

      We live in an era where journalists at our most prestigious newspapers are neither bright nor clever, nor thoughtful, nor even truly curious.

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      • “We live in an era where journalists at our most prestigious newspapers are neither bright nor clever, nor thoughtful, nor even truly curious.”

        That’s not the primary issue. They subscribe to a model of “journalism” that’s about driving a narrative above all other considerations.

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  5. Taibbi’s latest

    “The Justice Department Was Dangerous Before Trump. It’s Out of Control Now

    The recent Trump investigation is just the latest chapter of a long-brewing civil liberties nightmare. Part 1 of a series.

    Matt Taibbi
    Sep 17”

    https://taibbi.substack.com/p/the-justice-department-was-dangerous

    Like

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