Coffee With Greta: Is the Fed Overdoing It?


DJIA Futures: -389 (-1.3%)

SPX Futures: -53 (-1.4%)

NASDAQ Futures: -162 (-1.4%)

Good morning friends!

Futures are tumbling as traders fear the Fed may be overdoing it with rate hikes.

Let’s get right to it!

Goldman Sachs Cuts S&P 500 Price Target

Goldman Sachs (GS) slashed its end-of-the-year price target for the S&P 500 as the bank sees the Fed’s tightening policy ending in a “hard landing”. 

Goldman cut that target by about 16% to 3,600 points. 

Analyst David Kostin said, “Based on our client discussions, a majority of equity investors have adopted the view that a hard landing scenario is inevitable and their focus is on the timing, magnitude and duration of a potential recession and investment strategies for that outlook.”

The major indexes are all set to open lower today and log large losses for the week amid fears the Fed is overdoing it and will cause an economic downturn.

The Dow Jones is on track to open well below 30,000.

Treasury Yields Continue Surge

U.S. Treasury yields are marching higher today with the 2-year hitting a fresh 15-year high. 

The 2-year yield is currently up 8 basis points to 4.21% after hitting a high of 4.266% earlier this morning. 

The 10-year yield is up 5 basis points to 3.78%, trading around its highest levels seen since 2011. 

FedEx Announces Price Hikes, Cost-Cutting Measures

FedEx (FDX) shares are down 3.2% ahead of the open after announcing price hikes and cost-cutting efforts. 

The shipping giant said its Express, Ground, and Home delivery rates will all increase by 6.9% on average while Freight rates will rise by 6.9%-7.9%. 

The company also intends to save between $1.5 billion and $1.7 billion by parking planes and reducing its flights. 

Other cost-saving moves include closing some locations, suspending some Sunday operations, reducing vendor use, and deferring projects. 

The CEO said, “We’re moving with speed and agility to navigate a difficult operating environment, pulling cost, commercial, and capacity levers to adjust to the impacts of reduced demand.”

For fiscal 2023, FedEx expects total cost savings of $2.2 billion to $2.27 billion.

Costco Tops Fiscal Q4 Expectations

Costco (COST) shares are slipping 2.2% in premarket trade despite beating fiscal Q4 expectations on the top and bottom line. 

Here’s how the retailer’s results compared with analysts’ expectations:

  • EPS: $4.20 vs $4.17 expected
  • Revenue: $70.8 billion, in line with expectations
  • Same-store sales: +13.7%, in line with expectations

Costco’s full-year profits and sales were also in line with consensus estimates. 

But traders soured on the stock as the company’s margins contracted in the quarter.

Gross margins came in at 10.1%, down 74 basis points year over year. 

Costco said it is continuing to see pressure from higher wages, commodities, and transportation costs.

The CFO also announced Costco would not be raising its membership fees at this time to help pad those thin margins. 

Oil Prices Tumble on Recession Fears

Oil prices are falling today as recession fears take over the market. 

West Texas Intermediate crude futures are down 3.3% to under $81 bbl, while Brent crude futures are down 2.8% to under $88 bbl.

The Fed’s plan to stay aggressive on rate hikes has increased the chances of a recession in the U.S. economy. 

For the oil market, a recession comes with lower demand. 

In Case You Missed It

  • The Conference Board’s leading economic indicators index fell for the sixth month in a row. The index dropped 0.3% in August, which was higher than economists’ expectations for a 0.1% decline. Most components of the index declined, except for new jobless claims and the interest-rate spread. But the measure of current economic conditions rose by 0.1% while the lagging index rose by 0.7%.

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