Shares of auto stocks were falling today as investors across sectors processed comments from the FedEx CEO on the economy.
While FedEx is a transportation stock, the company’s business is largely seen as an indicator of how the economy is doing, and the company believes things are not looking good.
FedEx released its first-quarter results late yesterday, showing sales and profit fell short of analyst consensus estimates. The company withdrew its full-year guidance and announced store closures. Its CEO also believes that a global recession is coming.
That news caused concern among investors today and is likely to have caused child (LITTLE BOY -6.32%) to fall 6.4%, Ford (F -1.14%) drop 1%, and lucid group (LCD -1.88%) to slide 1.8% on Friday.
FedEx’s latest quarterly results aren’t usually of much interest to auto investors, but the company withdrew its guidance for the full year due to a slowdown in shipments and comments from its CEO had investors on edge today.
The delivery company said “global volumes declined as macroeconomic trends worsened significantly later in the quarter” and that it is implementing cost-cutting measures to offset the weakness.
FedEx said it will freeze new hires, close 90 stores and also close five corporate locations.
If that wasn’t bad enough, CEO Raj Subramaniam told CNBC, “We’re a reflection of everyone else’s business, especially the high-value economy in the world” and believes the economy will enter a “global recession.” “.
That’s not exactly what Nio, Ford and Lucid investors wanted to hear today. Auto companies can be especially susceptible to any economic downturn because consumers can cut back on spending, especially on big-ticket items like new cars.
These automakers are already grappling with rising costs, supply chain issues and semiconductor shortages that have affected their production. Add in a potential recession and these companies could have a lot more trouble ahead of them.
These economic fears come on the heels of the latest Bureau of Labor Statistics report issued earlier this week that showed the consumer price index rose 0.1% in August, much more than the 0.1% decline they expected. some economists.
Persistently high inflation is driving up the cost of materials for Nio, Ford and Lucid, resulting in each of the companies raising prices on some vehicles.
High inflation also means that the Federal Reserve will likely continue to raise interest rates to try to rein them in, with the next rate hike coming next week. And while inflation should come down, investors worry the Fed will slow the economy too much and end up curbing demand for new vehicles.
With inflation still near a 40-year high, supply chain issues plaguing the industry, and growing signs that an economic slowdown could be on the horizon, it’s not that surprising to see these auto stocks slide today. .
But investors should keep in mind that all of these problems don’t necessarily mean that Nio, Ford and Lucid aren’t good investments. It just means investors will have to be patient at this point as companies find their footing in a tough time.
chris niger has no position in any of the mentioned stocks. The Motley Fool has positions and recommends FedEx and Nio Inc. The Motley Fool has a disclosure policy.