US Stock Market Overview – Stocks Drop Ahead of Fed, FedEx Misses on Top and Bottom Line

US stocks were lower Monday with all three major average closing in the red. The S&P 500 was led lower by utilities and financials while healthcare and technology bucked the trend. Trader’s seemed to hold their powder ahead of the Fed’s decision on interest rates which is scheduled to be released on Wednesday. After the closing bell, FedEx reported financial results which say the transportation giant miss on both the top and bottom line.

FedEx Describes Weakness in Economic Growth

The worse than expected financial results reported by transportation bellweather FedEx provides a key look at how the US economy is performing. After the closing bell, Fedex reported financial results. Shares of FedEx dropped more than 5% following disappointing Q3 results. EPS came in at 3.03 compared to 3.11 expected. Revenue came in at 17.01 billion versus expectations of 17.67 billion. Additionally FedEx issued weak full-year 2019 earnings per share guidance between 15.10 and 15.90 compared to the forecast 15.97.

The Fed is on Deck

The Federal Reserve will conclude its 2-day meeting on Wednesday, and no change in monetary policy is expected. The focus for traders will be on the dot plots which is the future forecast of interest rates. As recently as December, more than 10-Fed members forecast that interest rates would rise as much as 2-3 times or 75-basis points during 2019. Currently, the market has priced in no change and a possible cut in rate by the end of 2019.

The Fed pivoted in January and since that period stock prices have been buoyed. With rates unlikely to move higher, and economic data pointing to slightly slower growth, the Fed has created a put which should take riskier assets higher.

Another issue the Fed will have to discuss is the mix of bonds they will stop selling. Recall, the Fed announced that they were near the end of their portfolio runoff, and with that in mind, they need to determine if they should hold on to bill or bonds, long or short tenor, agency or treasuries. This decision will effect the values of many different market bonds.

The Atlanta Fed GDPNow Model Edges Higher

Both the Atlanta Fed GDPNow model and the New Fed’s Nowcast growth model show subdued growth in the Q1 of 2019. The GDPNow mondey shows that GDP will increase by 0.4% in Q1 up from 0.2%. The Nowcast is showing that growth with a climb of 1.4% in the Q1.

Trade Talks Continue

News that US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin expect to travel to Chinathe week of March 25, helped buoy stock prices. The goal of the two is to meet with Chinese Vice Premier Liu He. It is not clear how long the talks will last. Mr. Liu will pay a return trip to Washington, D.C., the following week. Trade talks between the two nations are in the final stages, with a target date for a deal by the end of April.