Stocks fluctuate on FedEx, inflation reports
A cautious forecast from FedEx and a warning about the creditworthiness of 22 banks gave investors new reasons to worry about the economy Wednesday.
Stocks mostly fell, extending the two preceding days’ losses, but shares of healthcare and technology companies posted gains.
FedEx issued a weak profit forecast and downbeat comments about the economy. Analysts look to shipping companies’ business as a gauge of the economy’s strength.
The financial sector led the market down after Standard & Poor’s cut its ratings on the debt of 18 banks, including Wells Fargo, Capital One Financial and KeyCorp, and revised its outlook for four other banks to warn about possible downgrades. S&P;, which lowered the debt of four of the banks to “junk” status, cited concerns that the financial industry would remain volatile and that banks would face tighter regulatory oversight under a revamp proposal unveiled Wednesday by President Obama.
In a bright spot, consumer prices rose less than forecast in May. Investors have been worrying that rising prices will threaten a recovery in the economy by curbing demand.
The Dow Jones industrial average fell 7.49 points, or 0.1%, to 8,497.18 after moving in and out of positive territory during the day. The broader S&P; 500 index fell 1.26 points, or 0.1%, to 910.71. But the tech-dominated Nasdaq composite index rose 11.88 points, or 0.7%, to 1,808.06.
The Russell 2,000 index of shares of smaller companies rose 0.7%.
Stocks that fell outnumbered those that rose by 3 to 2 on the New York Stock Exchange.
Shares of FedEx fell after the company reported that its loss widened in the latest quarter and said it expected extremely difficult conditions in the next two quarters. Investors often look to the results of shipping companies like FedEx as a leading indicator of economic activity, and the company’s report helped send the overall stock market lower in the early going.
Among the banks downgraded by S&P;, Wells Fargo sank 5.4% and KeyCorp tumbled 7.8%. Capital One and BB&T; each lost 2.9%. An index of the stocks of 24 large banks slumped 3.3%.
The Labor Department said the consumer price index rose a seasonally adjusted 0.1% last month, less than the 0.3% increase expected by economists. Excluding volatile food and energy costs, core prices rose 0.1%, as expected.
Long-term Treasury yields fell once more on economic concerns. The benchmark 10-year T-note dropped to 3.64% from 3.67% late Tuesday.
Oil rose 56 cents to settle at $71.03 a barrel after a government report said crude held in U.S. storage facilities fell for a third straight week.
The dollar slid 0.5% against a basket of other major currencies, while gold prices rose.
Overseas, most major stock markets fell sharply. Key indexes dropped 1.2% in Britain, 1.9% in Germany and 1.6% in France. But Japanese shares closed up 0.9%.