S&P 500, Dow slip as rate-cut rally sputters; FedEx slides

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The benchmark S&P 500 and the blue-chip Dow inched lower on Wednesday as investors took a breather from a rally that was sparked by the Federal Reserve’s likely pivot to a dovish policy, while FedEx tumbled after issuing a grim outlook.

The three main indexes had advanced over 2% since the Fed’s December 13 meet where policymakers projected lower policy rates by the end of 2024, with the Dow notching fresh record highs and the S&P 500 within arm’s reach of its highest closing levels since January 2022.

Since then, central bank officials have attempted to keep investor euphoria in check, the latest being Chicago Fed President Austan Goolsbee who said further progress on beating back inflation will be the decisive factor in any central bank decision next year to reduce interest rates.

“Just the fact that we’ve had such a strong run (of gains) in the overall market, it is taking a little bit of a break,” said Robert Pavlik, senior portfolio manager at Dakota Wealth.

Still, traders expect the Fed to ease credit conditions by over 125 basis points by September next year, with a 79% chance that the first cut of at least 25 basis points could come in as early as March 2024, according to the CME Group’s Fed Watch tool.

Some analysts, however, pointed that the market expectations around rate cuts might be too aggressive.

“I don’t think the economy is slipping to the point where you need four or five rate cuts … most likely two rate cuts are coming in 2024 and then the Fed is going to be on hold after that,” Pavlik said.

Meanwhile, FedEx slid 10.1% after the global delivery firm cut its full-year revenue forecast and reported quarterly profit that fell far short of analysts’ targets.

Volatile macroeconomic conditions, muted retailer restocking and reduced demand from the company’s largest Express customer, the US Postal Service (USPS), dealt a blow to the company’s air delivery business.

The results also dragged down shares of rival United Parcel Service by 2.1%.

At 9:46 a.m. ET, the Dow Jones Industrial Average was down 75.41 points, or 0.20%, at 37,482.51, the S&P 500was down 3.90 points, or 0.08%, at 4,764.47, and the Nasdaq Composite was up 6.09 points, or 0.04%, at 15,009.32.

Nine of the top 11 S&P 500 sectors were in declines, though the communications services sector added 1.1%,underpinned by gains in Alphabet.

Alphabet surged 2.4% to a two-month high after a report said Google plans to reorganize a big part of its 30,000-person ad sales unit, citing a person with knowledge of the situation.

General Mills slipped 2.5% after the Cheerios cereal-maker trimmed its annual sales forecast due to slowing demand for its higher-priced products.

Declining issues outnumbered advancers for a 1.28-to-1ratio on the NYSE and for a 1.38-to-1 ratio on the Nasdaq.

The S&P index recorded 13 new 52-week highs and one new low, while the Nasdaq recorded 60 new highs and 34 new lows.