Overnight – Rate cut enthusiasm starts to run out of steam

Stocks were mixed on Friday night as investors weighed up a slump in Fedex and expectations for further Federal Reserve rate cuts following the central bank’s jumbo-sized cut earlier this week.   

Investor moods were boosted late this week after the Federal Reserve cut interest rates by 50 basis points. Historically, stocks have performed well in periods when the Fed is cutting rates while the US economy is still growing and the market now appears to be expecting this outcome.

This marks a turnaround from concerns at the start of August, when weak US job data fueled concerns that the Fed had waited too long before cutting rates.

Federal Reserve speakers returned to the spotlight following the ‘black out’ period, with remarks form Philadelphia Fed  president Patrick Harker and fed Governor Michelle Bowman in focus. Fed Governor Michelle Bowman said Friday that she voted against the central bank’s decision to begin the rate-cutting cycle with jumbo cut to avoid stoking expectations that the Fed has won its battle against inflation. Bowman was the sole voting Fed member who voted against the Fed’s 50 basis point cut in September in favor of a lesser 25bps cut. 

Delivery and logistics giant FedEx stock slid 15% after logging substantially weaker-than-expected quarterly earnings. The company was hit by customers shifting to cheaper, slower options, while industrial demand was also softer than expected. FedEx is considered as a bellwether for the global economy, given its heavy exposure to trade. Its weak quarterly earnings also raise questions over a potential slowdown in activity.