A fleet of planes that UPS grounded after a deadly crash isn’t expected to be back in service during the peak holiday season due to inspections and possible repairs, the company said Wednesday in an internal memo.
The airline expects it will be several months before its McDonnell Douglas MD-11 fleet returns to service as it works to meet Federal Aviation Administration guidelines, said the memo from UPS Airlines president Bill Moore to employees. The process was originally estimated to take weeks but is now expected to take several months.
A fiery MD-11 plane crash on Nov. 4 in Louisville, Kentucky, killed 14 people and injured at least 23 when the left engine detached during takeoff. Cargo carriers grounded their McDonnell Douglas MD-11 fleets shortly after, ahead of a directive from the FAA.
“Regarding the MD-11 fleet, Boeing’s ongoing evaluation shows that inspections and potential repairs will be more extensive than initially expected,” Moore wrote in the memo.
A UPS spokesperson said in a statement that the company will rely on contingency plans to deliver for customers throughout the peak season, and it “will take the time needed to ensure that every aircraft is safe.”
The 109 remaining MD-11 airliners, averaging more than 30 years old, are exclusively used to haul cargo for package delivery companies. MD-11s make up about 9% of the UPS airline fleet and 4% of the FedEx fleet.
Boeing, which took over as the manufacturer of MD-11s since merging with McDonnell Douglas in 1997, said in a statement that it is “working diligently to provide instructions and technical support to operators” so that they can meet the FAA’s requirements.
The FAA said Boeing will develop the procedures for inspections and any corrective actions, pending approval from the FAA.
WASHINGTON (AP) — With Thanksgiving and the formal launch of the holiday shopping season this week, Americans will again gather for Turkey Day meals before knocking off items on their Christmas gift lists.
Most big U.S. retailers are closed on Thanksgiving Day. However, many will open early the following day, Black Friday, the unofficial start of the holiday gift-buying season and the biggest shopping day of the year.
Here’s what is open and closed this Thanksgiving, along with a travel forecast from the experts at AAA auto club.
Government Buildings
Government offices, post offices, courts and schools are closed.
Banks and the stock market
U.S. stock markets and banks are closed Thursday; however, markets reopen on Friday for a shortened trading day, wrapping up at 1 p.m. Eastern.
Package Delivery
Standard FedEx and UPS pickup and delivery services will not be available on Thanksgiving, although some critical services will be offered at certain locations.
Retailers
Walmart will be closed on Thanksgiving but most stores will open at 6 a.m. local time on Black Friday.
Target will be closed on Thanksgiving, but most stores will open at 6 a.m. local time on Black Friday.
Macy’s will be closed on Thanksgiving, but most stores will have extended hours from 6 a.m. to 11 p.m. on Black Friday.
Kohl’s will be closed on Thanksgiving, but many stores will be open as early as 5 a.m. on Black Friday. Check your local location for hours.
Costco will be closed on Thanksgiving, but will reopen on Black Friday. Check your local store’s website for hours.
CVS will close early on Thanksgiving. You can call your local store or check store and pharmacy hours on the CVS Pharmacy website.
Walgreens will close most of its stores on Thanksgiving, though some 24-hour locations will be open. Check your local store for more information.
Grocery Stores
Most national grocery store chains are open on Thanksgiving for those last-minute turkey day needs, although many close early. Check your local store for details.
Travel
With most schools closed Thursday and Friday, the long Thanksgiving weekend is the busiest holiday travel period of the year, according to AAA.
AAA projects that 81.8 million people will travel at least 50 miles from home over the Thanksgiving holiday period between Tuesday, Nov. 25 and Monday, Dec. 1. That’s 1.6 million more travelers compared to last Thanksgiving, which would be a new record.
AAA estimates that at least 73 million people will travel by car, amounting to nearly 90% of Thanksgiving travelers. About 1.3 million more people will be on the road this year compared to last year, AAA predicts.
Drivers are currently paying around $3 for a gallon of regular gasoline, according to AAA. Last year, the national average was $3.06 on Thanksgiving Day.
According to AAA, 6 million U.S. travelers are expected to take domestic flights over the 7-day holiday period, a 2% increase over 2024. That figure could end up lower if flights are canceled or delayed.
Travel by other modes is expected to increase by 8.5% to nearly 2.5 million people. Other forms of travel include bus, train, and cruise ships.
A pilot performs a walkaround before a United Airlines flight
Leslie Josephs/CNBC
U.S. passenger airlines have added nearly 194,000 jobs since 2021 as companies went on a hiring spree after spending months in a pandemic slump, according to the U.S. Department of Transportation. Now the industry is cooling its hiring.
Airlines are close to their staffing needs but the slowdown is also coming in part because they’re facing a slew of challenges.
Annual pay for a three-year first officer on midsized equipment at U.S. airlines averaged $170,586 in March, up from $135,896 in 2019, according to Kit Darby, an aviation consultant who specializes in pilot pay.
Since 2019, costs at U.S. carriers have climbed by double-digit percentages. Stripping out fuel and net interest expenses, they’ll be up about 20% at American Airlines this year and around 28% higher at both United Airlines and Delta Air Lines from 2019, according to Raymond James airline analyst Savanthi Syth.
It is more pronounced at low-cost airlines. Southwest Airlines‘ costs will likely be up 32%, JetBlue Airways‘ up nearly 35% and Spirit Airlines will see a rise of almost 39% over the same period, estimated Syth, whose data is adjusted for flight length.
Friday’s U.S. jobs report showed air transportation employment in August roughly in line with July’s.
But there have been pullbacks. In the most severe case, Spirit Airlines furloughed 186 pilots this month, their union said Sunday, as the carrier’s losses have grown in the wake of a failed acquisition by JetBlue Airways, a Pratt & Whitneyengine recall and an oversupplied U.S. market. Last year, even before the merger fell apart, it offered staff buyouts.
Other airlines are easing hiring or finding other ways to cut costs.
Frontier Airlines is still hiring pilots but said it will offer voluntary leaves of absence in September and October, when demand generally dips after the summer holidays but before Thanksgiving and winter breaks. A spokeswoman for the carrier said it offers those leaves “periodically” for “when our staffing levels exceed our planned flight schedules.”
Southwest Airlines expects to end the year with 2,000 fewer employees compared with 2023 and earlier this year said it would halt hiring classes for work groups including pilots and flight attendants. CFO Tammy Romo said on an earnings call in July that the company’s headcount would likely be down again in 2025 as attrition levels exceed the Dallas-based carrier’s “controlled hiring levels.”
United Airlines, which paused pilot hiring in May and June, citing late-arriving planes from Boeing, said it plans to add 10,000 people this year, down from 15,000 in each 2022 and 2023. It plans to hire 1,600 pilots, down from more than 2,300 last year.
It’s a departure from the previous years when airlines couldn’t hire employees fast enough. U.S. airlines are usually adding pilots constantly since they are required to retire at age 65 by federal law.
Airlines shed tens of thousands of employees in 2020 to try to stem record losses. Packages of more than $50 billion in taxpayer aid that were passed to get the industry through its worst-ever crisis prohibited layoffs, but many employees took carriers up on their repeated offers of buyouts and voluntary leaves.
Then, travel demand snapped back faster than expected, climbing in earnest in 2022 and leaving airlines without experienced employees like customer service agents. It also led to the worst pilot shortage in recent memory.
In response, companies — especially regional carriers — offered big bonuses to attract pilots.
But times have changed. Even air freight giants were competing for pilots in recent years but demand has waned as FedEx and UPS look to cut costs.
American Airlines CEO Robert Isom said in an investor presentation in March that the carrier added about 2,300 pilots last year and that it expects to hire about 1,300 this year.
“We will be hiring for the foreseeable future at levels like that,” he said at the time.
Despite the lower targets, students continue to fill classrooms and cockpits to train and build up hours to become pilots, said Ken Byrnes, chairman of the flight department at Embry-Riddle Aeronautical University.
“Demand for travel is still there,” he said. “I don’t see a long-term slowdown.”
Real estate stocks have been lagging the market, but here is one corner in particular where Janus Henderson sees an underappreciated opportunity. Overall, real estate stocks have started to rebound, with the S & P 500 real estate sector rallying 10% over the past month. However, it is one of the worst-performing sectors in the index year to date, up about 5% compared to the S & P ‘s 19% gain through Thursday. Still, there is one area that has fared worse than many of its counterparts: industrial real estate investment trusts. Greg Kuhl, a portfolio manager in Janus Henderson’s global property equities team, thinks that is going to change. “Supply is going to be falling off really dramatically towards the second half of this year and into next year — and it seems like demand in the right product types and the right submarkets is holding up just fine,” he explained. “There’s some really interesting opportunities.” REITs can also pay out attractive dividends. .SPLRCR YTD mountain S & P 500 Real Estate Sector year to date As its name implies, industrial REITs own, manage and rent out space in industrial facilities. The benchmark Janus uses for the overall REIT sector is the FTSE Nareit Equity REITs , which tracks commercial real estate across the U.S. The index has seen a total return just north of 7% year to date, as of Thursday. However, its industrial REIT index has a total return of -0.75% so far this year. The industry took a hit in April after industrial property giant Prologis cut its full-year outlook , citing economic uncertainty and delayed leasing decisions. However, in July, the company raised its full-year guidance . Meanwhile, construction data shows that supply will be diminishing, Kuhl noted. That said, he is being selective within the subsector. “In our view, supply/demand fundamentals are more favorable in the Sun Belt and Midwest markets today as compared with coastal markets, especially California,” he said. California is the largest industrial market in the U.S., he added. One of his largest industrial overweights is EastGroup Properties , which has exposure to the Sun Belt. The company, which has a dividend yield of 2.69%, owns smaller building sizes. “Some of the Sun Belt markets, as we all know, there’s population growth and the product that EastGroup group owns, you could call it ‘last mile industrial’ — closer to where people live, they’re smaller — there’s a lot of demand for that,” Kuhl said. “You’re not just trying to lease to Amazon or FedEx … you can also lease to lots of small businesses that are based locally.” EGP YTD mountain EastGroup Properties year to date Another name Kuhl likes is First Industrial Realty Trust , which has national and coastal exposure and is trading at a significant discount to its peers, he said. The stock has a 2.69% dividend yield. While the company has a lot of properties in California that are not yet leased, it has an advantage in that the buildings were done at a really low-cost basis, he noted. “They can go out and charge a market rent for a building that’s currently vacant and, all of a sudden, it’s generating income for them,” Kuhl explained. “We don’t think that’s priced into the stock.” FR YTD mountain First Industrial Realty Trust year to date He is also encouraged by the initial public offering of Lineage , which started trading July 25 on the Nasdaq. It is the market’s largest IPO so far this year. Lineage, ranked No. 46 on the 2024 CNBC Disruptor 50 list, is the largest temperature-controlled warehouse REIT in the world. “Cold storage is a specialized area within industrial that we like and where supply/demand fundamentals are also more favorable than coastal traditional industrial,” Kuhl said. The stock is up more than 10% from its $78 IPO price, as of Thursday’s close. “This is a positive sign for industrial REITs and just REITs in general,” Kuhl said.
Natasha Craft, a 25-year-old FedEx driver from Mishawaka, Indiana. She has been locked out of her Yotta banking account since May 11.
Courtesy: Natasha Craft
When Natasha Craft first got a Yotta banking account in 2021, she loved using it so much she told her friends to sign up.
The app made saving money fun and easy, and Craft, a now 25-year-old FedEx driver from Mishawaka, Indiana, was busy getting her financial life in order and planning a wedding. Craft had her wages deposited directly into a Yotta account and used the startup’s debit card to pay for all her expenses.
The app — which gamifies personal finance with weekly sweepstakes and other flashy features — even occasionally covered some of her transactions.
“There were times I would go buy something and get that purchase for free,” Craft told CNBC.
Today, her entire life savings — $7,006 — is locked up in a complicated dispute playing out in bankruptcy court, online forums like Reddit and regulatory channels. And Yotta, an array of other startups and their banks have been caught in a moment of reckoning for the fintech industry.
For customers, fintech promised the best of both worlds: The innovation, ease of use and fun of the newest apps combined with the safety of government-backed accounts held at real banks.
The startups prominently displayed protections afforded by the Federal Deposit Insurance Corp., lending credibility to their novel offerings. After all, since its 1934 inception, no depositor “has ever lost a penny of FDIC-insured deposits,” according to the agency’s website.
But the widening fallout over the collapse of a fintech middleman called Synapse has revealed that promise of safety as a mirage.
Starting May 11, more than 100,000 Americans with $265 million in deposits were locked out of their accounts. Roughly 85,000 of those customers were at Yotta alone, according to the startup’s co-founder, Adam Moelis.
CNBC reached out to fintech customers whose lives have been upended by the Synapse debacle.
They come from all walks and stages of life, from Craft, the Indiana FedEx driver; to the owner of a chain of preschools in Oakland, California; a talent analyst for Disney living in New York City; and a computer engineer in Santa Barbara, California. A high school teacher in Maryland. A parent in Bristol, Connecticut, who opened an account for his daughter. A social worker in Seattle saving up for dental work after Adderall abuse ruined her teeth.
Since Yotta, like most popular fintech apps, wasn’t itself a bank, it relied on partner institutions including Tennessee-based Evolve Bank & Trust to offer checking accounts and debit cards. In between Yotta and Evolve was a crucial middleman, Synapse, keeping track of balances and monitoring fraud.
Founded in 2014 by a first-time entrepreneur named Sankaet Pathak, Synapse was a player in the “banking-as-a-service” segment alongside companies like Unit and Synctera. Synapse helped customer-facing startups like Yotta quickly access the rails of the regulated banking industry.
It had contracts with 100 fintech companies and 10 million end users, according to an April court filing.
Until recently, the BaaS model was a growth engine that seemed to benefit everybody. Instead of spending years and millions of dollars trying to acquire or become banks, startups got quick access to essential services they needed to offer. The small banks that catered to them got a source of deposits in a time dominated by giants like JPMorgan Chase.
But in May, Synapse, in the throes of bankruptcy, turned off a critical system that Yotta’s bank used to process transactions. In doing so, it threw thousands of Americans into financial limbo, and a growing segment of the fintech industry into turmoil.
“There is a reckoning underway that involves questions about the banking-as-a-service model,” said Michele Alt, a former lawyer for the Office of the Comptroller of the Currency and a current partner at consulting firm Klaros Group. She believes the Synapse failure will prove to be an “aberration,” she added.
The most popular finance apps in the country, including Block’s Cash App, PayPal and Chime, partner with banks instead of owning them. They account for 60% of all new fintech account openings, according to data provider Curinos. Block and PayPal are publicly traded; Chime is expected to launch an IPO next year.
Block, PayPal and Chime didn’t provide comment for this article.
While industry experts say those firms have far more robust ledgering and daily reconciliation abilities than Synapse, they may still be riskier than direct bank relationships, especially for those relying on them as a primary account.
“If it’s your spending money, you need to be dealing directly with a bank,” Scott Sanborn, CEO of LendingClub, told CNBC. “Otherwise, how do you, as a consumer, know if the conditions are met to get FDIC coverage?”
Sanborn knows both sides of the fintech divide: LendingClub started as a fintech lender that partnered with banks until it bought Boston-based Radius in early 2020 for $185 million, eventually becoming a fully regulated bank.
Scott Sanborn, LendingClub CEO
Getty Images
Sanborn said acquiring Radius Bank opened his eyes to the risks of the “banking-as-a-service” space. Regulators focus not on Synapse and other middlemen, but on the banks they partner with, expecting them to monitor risks and prevent fraud and money laundering, he said.
But many of the tiny banks running BaaS businesses like Radius simply don’t have the personnel or resources to do the job properly, Sanborn said. He shuttered most of the lender’s fintech business as soon as he could, he says.
“We are one of those people who said, ‘Something bad is going to happen,’” Sanborn said.
A spokeswoman for the Financial Technology Association, a Washington, D.C.-based trade group representing large players including Block, PayPal and Chime, said in a statement that it is “inaccurate to claim that banks are the only trusted actors in financial services.”
“Consumers and small businesses trust fintech companies to better meet their needs and provide more accessible, affordable, and secure services than incumbent providers,” the spokeswoman said.
“Established fintech companies are well-regulated and work with partner banks to build strong compliance programs that protect consumer funds,” she said. Furthermore, regulators ought to take a “risk-based approach” to supervising fintech-bank partnerships, she added.
The implications of the Synapse disaster may be far-reaching. Regulators have already been moving to punish the banks that provide services to fintechs, and that will undoubtedly continue. Evolve itself was reprimanded by the Federal Reserve last month for failing to properly manage its fintech partnerships.
In a post-Synapse update, the FDIC made it clear that the failure of nonbanks won’t trigger FDIC insurance, and that even when fintechs partner with banks, customers may not have their deposits covered.
The FDIC’s exact language about whether fintech customers are eligible for coverage: “The short answer is: it depends.”
While their circumstances all differed vastly, each of the customers CNBC spoke to for this story had one thing in common: They thought the FDIC backing of Evolve meant that their funds were safe.
“For us, it just felt like they were a bank,” the Oakland preschool owner said of her fintech provider, a tuition processor called Curacubby. “You’d tell them what to bill, they bill it. They’d communicate with parents, and we get the money.”
The 62-year-old business owner, who asked CNBC to withhold her name because she didn’t want to alarm employees and parents of her schools, said she’s taken out loans and tapped credit lines after $236,287 in tuition was frozen in May.
Now, the prospect of selling her business and retiring in a few years seems much further out.
“I’m assuming I probably won’t see that money,” she said, “And if I do, how long is it going to take?”
When Rick Davies, a 46-year-old lead engineer for a men’s clothing company that owns online brands including Taylor Stitch, signed up for an account with crypto app Juno, he says he “distinctly remembers” being comforted by seeing the FDIC logo of Evolve.
“It was front and center on their website,” Davies said. “They made it clear that it was Evolve doing the banking, which I knew as a fintech provider. The whole package seemed legit to me.”
He’s now had roughly $10,000 frozen for weeks, and says he’s become enraged that the FDIC hasn’t helped customers yet.
For Davies, the situation is even more baffling after regulators swiftly took action to seize Silicon Valley Bank last year, protecting uninsured depositors including tech investors and wealthy families in the process. His employer banked with SVB, which collapsed after clients withdrew deposits en masse, so he saw how fast action by regulators can head off distress.
“The dichotomy between the FDIC stepping in extremely quickly for San Francisco-based tech companies and their impotence in the face of this similar, more consumer-oriented situation is infuriating,” Davies said.
The key difference with SVB is that none of the banks linked with Synapse have failed, and because of that, the regulator hasn’t moved to help impacted users.
Consumers can be forgiven for not understanding the nuance of FDIC protection, said Alt, the former OCC lawyer.
“What consumers understood was, ‘This is as safe as money in the bank,’” Alt said. “But the FDIC insurance isn’t a pot of money to generally make people whole, it is there to make depositors of a failed bank whole.”
For the customers involved in the Synapse mess, the worst-case scenario is playing out.
While some customers have had funds released in recent weeks, most are still waiting. Those later in line may never see a full payout: There is a shortfall of up to $96 million in funds that are owed to customers, according to the court-appointed bankruptcy trustee.
That’s because of Synapse’s shoddy ledgers and its system of pooling users’ money across a network of banks in ways that make it difficult to reconstruct who is owed what, according to court filings.
The situation is so tangled that Jelena McWilliams, a former FDIC chairman now acting as trustee over the Synapse bankruptcy, has said that finding all the customer money may be impossible.
Despite weeks of work, there appears to be little progress toward fixing the hardest part of the Synapse mess: Users whose funds were pooled in “for benefit of,” or FBO, accounts. The technique has been used by brokerages for decades to give wealth management customers FDIC coverage on their cash, but its use in fintech is more novel.
“If it’s in an FBO account, you don’t even know who the end customer is, you just have this giant account,” said LendingClub’s Sanborn. “You’re trusting the fintech to do the work.”
While McWilliams has floated a partial payment to end users weeks ago, an idea that has support from Yotta co-founder Moelis and others, that hasn’t happened yet. Getting consensus from the banks has proven difficult, and the bankruptcy judge has openly mused about which regulator or body of government can force them to act.
The case is “uncharted territory,” Judge Martin Barash said, and because depositors’ funds aren’t the property of the Synapse estate, Barash said it wasn’t clear what his court could do.
Evolve has said in filings that it has “great pause” about making any payments until a full reconciliation happens. It has further said that Synapse ledgers show that nearly all of the deposits held for Yotta were missing, while Synapse has said that Evolve holds the funds.
“I don’t know who’s right or who’s wrong,” Moelis told CNBC. “We know how much money came into the system, and we are certain that that’s the correct number. The money doesn’t just disappear; it has to be somewhere.”
In the meantime, the former Synapse CEO and Evolve have had an eventful few weeks.
Pathak, who dialed into early bankruptcy hearings while in Santorini, Greece, has since been attempting to raise funds for a new robotics startup, using marketing materials with misleading claims about its ties with automaker General Motors.
And only days after being censured by the Federal Reserve about its management of technology partners, Evolve was attacked by Russian hackers who posted user data from an array of fintech firms, including Social Security numbers, to a dark web forum for criminals.
For customers, it’s mostly been a waiting game.
Craft, the Indiana FexEx driver, said she had to borrow money from her mother and grandmother for expenses. She worries about how she’ll pay for catering at her upcoming wedding.
“We were led to believe that our money was FDIC-insured at Yotta, as it was plastered all over the website,” Craft said. “Finding out that what FDIC really means, that was the biggest punch to the gut.”
She now has an account at Chase, the largest and most profitable American bank in history.
Parcels are seen in a street nearby UPS and FedEx trucks in a street of the Manhattan borough in New York City on December 4, 2023.
Charly Triballeau | AFP | Getty Images
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Worst day in months U.S. markets fell Wednesday, with all major indexes snapping their winning streaks in one of their worst trading sessions in months. Still, U.S. Treasury yields continued to dip. Asia-Pacific markets lost ground Thursday, following Wall Street lower. South Korea’s Kospi Index slipped 0.77% even as the country’s producer prices rose at their slowest pace in four months.
Clock’s ticking on watch ban Apple has failed in its bid to delay a ban on sales of Apple Watch, according to an International Trade Commission filing. That means only a White House intervention will let Apple continue selling its watches in the U.S. Joe Kiani, CEO of Masimo — the company involved in the intellectual property dispute with Apple — told CNBC on Monday that Apple had not reached out to settle.
Tesla’s the “it” stock Out of all securities on the U.S. market, Tesla’s on pace to attract the most amount of individual investor dollars in 2023, according to data from Vanda Research. That means inflows into the stock will surpass the SPDR S&P 500 ETF Trust, which tracks the largest index in the world. To put Tesla’s popularity in perspective, it wasn’t even among the top 20 stocks retail investors bought before 2019.
[PRO] Diversify your portfolio The upcoming year presents several challenges to investors. A recession might hit the U.S. economy, geopolitical risks might escalate and inflation might rebound. CNBC Pro spoke to three investment experts to find out how to create a diversified portfolio that can hedge against volatility in 2024.
FedEx‘s performance is often seen as a bellwether for the general economy. When businesses ship fewer parcels, it tends to indicate a slowdown in economic activity.
So, when FedEx issued a worse-than-expected forecast for its current fiscal year, and reported disappointing second-quarter results, it wasn’t solely a warning for investors in the company. FedEx, whose stock sank 12.05%, may also signal trouble for the broader market, according to Wolfe Research.
″[W]hile volatile at times, the correlation between FDX and the S&P has been a solid one,” Wolfe Research managing director Rob Ginsberg wrote on Monday. “Now, it probably won’t derail the year-end melt-up, but given the multitude of overbought conditions and stretched indicators, a market pricing in perfection just got a bit of troubling news.”
And markets indeed had a bad day. The S&P 500 tumbled 1.47%, the most it’s lost in one session since September. Meanwhile, the Dow Jones Industrial Average fell 1.27% and the Nasdaq Composite lost 1.5% — both indexes snapped their nine-day winning streaks in their worst day since October.
That disappointing showing, however, doesn’t necessarily mean the start of a prolonged slide for markets. Treasury yields are still dipping, which tends to boost stocks. There were also pockets of strength amid the sell-off yesterday. Alphabet, for instance, gained 1.24% and touched a new 52-week high during the session. Consumer confidence in December also picked up, according to the Conference Board.
Keith Buchanan, senior portfolio manager at Globalt Investments, said market losses were “more technical than fundamental,” meaning it was more the breakneck pace at which stocks had been rallying that posed a risk, rather than their intrinsic value.
“Markets were becoming overbought, and a pullback like this is natural given those conditions,” Buchanan said.
As any recipient of a FedEx package knows, a delayed delivery isn’t the end of the world; you just have to move past the hiccup. The same goes for markets.
A FedEx truck and cars commute on Highway 101 during heavy rain in San Francisco Bay Area of California, United States on December 20, 2023.
Tayfun Coskun | Anadolu | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
UK inflation’s looking OK U.K. inflation slid to 3.9% in November, the lowest annual reading since September 2021. That figure’s lower than the 4.4% economists had expected, and the 4.6% reading in October. Moreover, prices actually fell 0.2% for the month, compared with estimates of a 0.1% rise. Core consumer price index was also lower than expected, prompting a sharp fall in U.K. 10-year gilt yield.
Tesla’s the “it” stock Out of all securities on the U.S. market, Tesla’s on pace to attract the most amount of individual investor dollars in 2023, according to data from Vanda Research. That means inflows into the stock will surpass the SPDR S&P 500 ETF Trust, which tracks the largest index in the world. To put Tesla’s popularity in perspective, it wasn’t even among the top 20 stocks retail investors bought before 2019.
[PRO] Due for a breather Despite the massive rally in markets last week — and, indeed, since November — several strategists are cautioning their clients to be defensive, especially when it comes to the new year. The “rally is ripe for a breather,” wrote one Wall Street strategist, because earnings might falter in 2024.
FedEx‘s performance is often seen as a bellwether for the general economy. When businesses ship fewer parcels, it tends to indicate a slowdown in economic activity.
So, when FedEx issued a worse-than-expected forecast for its current fiscal year, and reported disappointing second-quarter results, it wasn’t solely a warning for investors in the company. FedEx, whose stock sank 12.05%, may also signal trouble for the broader market, according to Wolfe Research.
″[W]hile volatile at times, the correlation between FDX and the S&P has been a solid one,” Wolfe Research managing director Rob Ginsberg wrote on Monday.
“Now, it probably won’t derail the year-end melt-up, but given the multitude of overbought conditions and stretched indicators, a market pricing in perfection just got a bit of troubling news.”
And markets indeed had a bad day. The S&P 500 tumbled 1.47%, the most it’s lost in one session since September. Meanwhile, the Dow Jones Industrial Average fell 1.27% and the Nasdaq Composite lost 1.5% — both indexes snapped their nine-day winning streaks in their worst day since October.
That disappointing showing, however, doesn’t necessarily mean the start of a prolonged slide for markets. Treasury yields are still dipping, which tends to boost stocks. There were also pockets of strength amid the sell-off yesterday. Alphabet, for instance, gained 1.24% and touched a new 52-week high during the session. Consumer confidence in December also picked up, according to the Conference Board.
Keith Buchanan, senior portfolio manager at Globalt Investments, said market losses were “more technical than fundamental,” meaning it was more the breakneck pace at which stocks had been rallying that posed a risk, rather than the their intrinsic value.
“Markets were becoming overbought, and a pullback like this is natural given those conditions,” Buchanan said.
As any recipient of a FedEx package knows, a delayed delivery isn’t the end of the world; you just have to move past the hiccup. The same goes for markets.
U.S. stock indexes were higher on Wednesday as Wall Street tried to build on their year-end rally with a fresh record in sight for the S&P 500 index.
How are stock indexes trading
The S&P 500 SPX
was inching up 3 points, leaving it nearly flat, at 4,771
The Dow Jones Industrial Average DJIA
was rising 15 points, leaving it nearly flat, at 37,570
The Nasdaq Composite COMP
was edging up 35 points, or 0.2%, to 15,038
On Tuesday, the Dow booked a fifth straight record close, while the S&P 500 rose and the Nasdaq extended its winning streak to a ninth day.
What’s driving markets
U.S. stocks were edging higher on Wednesday with the S&P 500 less than 1% shy of the all-time closing high of 4796.56 it recorded at the start of January 2022, while the Dow industrials and Nasdaq were struggling to extend their nine consecutive daily gains.
The Wall Street large-cap benchmark S&P 500 has jumped 24.3% this year, partially powered by hopes that the U.S. economy has not been too badly damaged by the Federal Reserve’s ratcheting up of interest rates to cool inflation.
The latest leg of the rally reflects hopes that with inflation back down to 3.1%, the central bank will begin quickly trimming borrowing costs next year. Not even an concerted effort by Fed officials to counter the market’s rate-cut optimism has damped trader’s ardor.
This dismissal of less-dovish Fedspeak has left some observers bemused.
“Investors are dreaming of aggressive rate cuts in an environment of strong economic growth, and that is not the right recipe for easing inflation and keeping it sufficiently low,” Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “The robust economic data and high earnings expectations are not compatible with a dovish Fed,” she said.
Perhaps the current bullishness is also reflective of seasonal trends, with optimism about a festive bounce underpinning stocks. The “Santa Claus Rally” period stretches from the last five trading days of the year and first two trading days of the new year, according to the Stock Trader’s Almanac.
Since 1950, the S&P 500 has averaged a gain of 1.32% and closed higher 78.1% of the time over that period, according to Dow Jones Market Data.
Meanwhile, U.S. consumer confidence index rose to 110 in December, up from a downwardly revised 101 in the previous month, the Conference Board said Wednesday.
“The consumer is feeling pretty well as rates move lower, employers add to their payroll, and income expectations improve,” said Jeffrey J. Roach, chief economist at LPL Financial. “So far, investors have a green light as they merge into the new year.”
That said, investors will continue seeking guidance from more economic data due later this week that may provide more clarity on the Fed’s interest-rate path in 2024. A revision of third-quarter GDP print is expected on Thursday morning, followed by Friday’s personal consumption expenditure (PCE) inflation report — the Fed’s preferred inflation gauge.
Companies in focus
Shares of Alphabet Inc. GOOGL, +2.82%
were jumping 3.3% on Wednesday following a report that said its Google unit plans to reorganize a large part of its advertising sales unit.
Shares of FedEx Corp. FDX, -10.56%
were slumping 11% after the package-delivery giant trimmed its full-year sales forecast, amid continued concerns about subdued shipping demand through the peak holiday season.
Shares of General Mills Inc. GIS, -2.26%
were off 2.8% after the consumer-foods company reported fiscal second-quarter profit that beat expectations, while revenue missed and the full-year outlook as consumers continue “stronger-than-expected value-seeking behaviors.”
A FedEx plane lands at Shanghai Pudong International Airport in Shanghai on April 27, 2023.
Vcg | Visual China Group | Getty Images
FedEx shares tumbled more than 10% in premarket trading Wednesday, the morning after the package delivery giant lowered its revenue forecast as weaker demand hit sales.
The company said it expects a low-single-digit decline in revenue for the fiscal year, down from a previous forecast for flat sales year over year. Analysts had expected a revenue drop of less than 1% in the current fiscal year, according to LSEG, formerly known as Refinitiv.
It’s the second consecutive quarter FedEx has lowered its sales outlook.
The company’s Express unit, its largest, was especially challenged in the quarter with lower demand, surcharges and customers shifting to cheaper services, FedEx said.
“In the remainder of [fiscal] 2024, we expect revenue will continue to be pressured by volatile macroeconomic conditions, negatively affecting customer demand for our services across our transportation companies,” FedEx said in a filing. Its fiscal year ends May 31.
The company said, however, that operating income would improve thanks to its cost-cutting plan.
Here’s how FedEx performed versus Wall Street’s expectations:
Adjusted earnings per share: $3.99 vs. $4.18, according to analysts surveyed by LSEG
Automotive revenue: $22.17 billion vs. $22.41 billion expected
For the three-month period ending Nov. 30, FedEx reported net income of $900 million, or $3.55 a share, versus $788 million, or $3.07 a share, a year earlier. Adjusting for certain items, the company posted earnings of $1.01 billion or $3.99 per share, up more than 25% from a year earlier but below analyst forecasts.
The company credited cost-cutting initiatives for its higher profit. Revenue fell 3% to $22.17 billion from a year earlier.
“FedEx has delivered an unprecedented two consecutive quarters of operating income growth and margin expansion even with lower revenue, clear evidence of the progress we are making on our transformation as we navigate an uncertain demand environment,” FedEx CEO Raj Subramaniam said in a news release.
Amazon.com Inc. AMZN, -0.57%
has relaunched its Amazon Shipping delivery service after a pandemic-era pause, the company confirmed on Friday. The news, reported on earlier in the day by the Wall Street Journal, marks the return of a segment of the online retailer that went head-to-head with the likes of FedEx Corp. FDX, -0.85%
and United Parcel Service Inc. UPS, +0.29%
The service, which processes packages sold via Amazon and other outlets, is now running in most of the U.S., the Journal said. The shipping segment was put on halt after being overwhelmed by the boom in online demand during the pandemic, the Journal said. “We’re always working to develop new, innovative ways to support Amazon’s selling partners, and Amazon Shipping is another option for shipping packages to customers quickly and cost-effectively,” Amazon spokesperson Olivia Connors said in a statement. “We’ve been providing this service for a while with positive feedback so we’re now making it available to more selling partners.” Shares of Amazon were 0.1% lower after hours on Friday.
Package-delivery giant United Parcel Service Inc. and the Teamsters union on Tuesday said they had reached a tentative five-year labor agreement that would boost jobs, pay and other protections, after increasingly vocal threats of a strike reignited concerns about the impact to the economy and the nation’s shipping ecosystem.
Teamster locals in the U.S. and Puerto Rico will now meet on July 31 to review and recommend the tentative deal, which will cover 340,000 workers, the Teamsters said in a release. Rank-and-file members will vote on the deal starting on Aug. 3, with the voting process running until Aug. 22.
Under the deal’s terms, current full and part-time UPS UPS, -1.32%
workers in the Teamsters union will get $2.75 more per hour this year, and $7.50 more over the course of the contract, according to a release.
Current part-timers would have their pay raised to at least $21 per hour immediately, with a 48% average total wage hike over the next five years. New part-time hires would start at $21 per hour and advance to $23 per hour, the Teamsters said.
Full-time UPS delivery drivers in the Teamsters union would see their average top pay rate rise to $49 per hour.
The deal also ends a two-tier wage system at UPS and makes Martin Luther King Day a holiday for union members. UPS will also outfit newer delivery vehicles with air conditioning and cargo ventilation. The deal also ends forced overtime on union members’ days off.
Shares of UPS were up 0.8% in afternoon trade. Shares of rival FedEx Corp. FDX, +0.34%
were up 0.5%.
Talks between UPS and the union began in April. Some Wall Street analysts expected both sides to reach a deal, despite a more hardline stance from Teamster leadership.
“Rank-and-file UPS Teamsters sacrificed everything to get this country through a pandemic and enabled UPS to reap record-setting profits,” Teamsters General President Sean O’Brien said in a statement.
“Teamster labor moves America,” he continued. “The union went into this fight committed to winning for our members. We demanded the best contract in the history of UPS, and we got it. UPS has put $30 billion in new money on the table as a direct result of these negotiations.”
UPS Chief Executive Carol Tome, in a separate statement, also praised the deal.
“This agreement continues to reward UPS’s full- and part-time employees with industry-leading pay and benefits while retaining the flexibility we need to stay competitive, serve our customers and keep our business strong,” she said.
Shares of FedEx Corp. fell after hours on Tuesday after the package deliverer offered up a full-year profit forecast that fell short of expectations, as Wall Street zeroes in on the company’s efforts to cut billions in costs over its next two fiscal years following a drop-off in consumer demand.
Not long after the company released those results, FedEx also said FDX, -0.78%
that Chief Financial Officer Michael Lenz would retire on July 31. Management said it had begun an external search to fill the position. Lenz, who became CFO in March 2020, will serve as a senior adviser until Dec. 31 to help with the changeover.
The company reported fourth-quarter net income of $1.54 billion, or $6.05 a share, compared with $558 million, or $2.13 a share, in the same quarter last year. Revenue fell to $21.9 billion, compared with $24.4 billion in the prior-year quarter.
Adjusted for goodwill, efforts to slim the business and a legal issue within FedEx’s FDX, -0.78%
ground delivery operations, FedEx earned $4.94 a share, compared with $6.87 a year ago.
Analysts polled by FactSet expected adjusted earnings per share of $4.85, on revenue of $22.55 billion.
“The quarter’s results were negatively affected by continued demand weakness and cost inflation, partially offset by cost-reduction actions and U.S. domestic package yield improvement,” management said in a statement.
For the fiscal year ahead, which ends next May, FedEx forecast “flat to low-single-digit-percent” growth in sales, with earnings per share of $16.50 to $18.50. The company said it expects permanent reductions from its cost-cutting program — which it calls “DRIVE” — of $1.8 billion.
For the full year, analysts expect FedEx to earn $18.33 a share, on $90.91 billion in sales. FedEx ended its most recent fiscal year with $90.2 billion in sales.
Shares fell 4% after hours.
FedEx since last year has tried to slash billions in costs amid slowing demand for package deliveries, after inflation forced customers to rethink their spending priorities. It has nudged shipping prices higher, cut flights, cut executive jobs and closed offices. In April, FedEx announced plans to consolidate its air and ground operations into a single organization.
In the process, the delivery service’s stock price has rebounded significantly since getting slammed in September, when it warned of a slowdown in shipping demand. That rebound has put the stock in roughly in the same spot it was a year ago.
The company also reported earnings amid other tensions within the nation’s shipping and transportation infrastructure, after online-shopping demand during the pandemic led to higher shipping prices and thus a surge in profits.
While West Coast dockworkers and their employers reached a tentative deal on a contract last week, Teamsters union members at FedEx’s main rival, United Parcel Service Inc. UPS, -0.73%, voted to authorize a strike if UPS doesn’t offer them a contract they don’t like. The friction has led to worries that businesses and customers would have to pay more to have products delivered.
Welcome back, animal spirits. The mood on Wall Street has brightened a lot of late, helped this week by the Fed holding the line on interest rates on Wednesday for the first time since March 2022. There also were some decent economic numbers, such as signs of declining inflation in May reported on Tuesday and Wednesday, and a decent retail sales report that came out Thursday. That led the S & P 500 rally to broaden out to lagging sectors, such as industrials and materials stocks, pushing the index past the 4,300 level that had held it back for the past year, igniting enthusiasm for stocks and leading the index to end the week above 4,400 . For now, it’s not a brighter economic picture or an exuberant earnings outlook pushing stocks higher. It’s momentum and fear of missing out on further gains. Strength begets strength, in other words. Another reason that some investors have come back to stocks is simply because the S & P 500 ended the week more than 23% above last October’s low. “History says the market tends to continue to run,” said Sam Stovall, chief investment strategist at CFRA Research. “The next level of resistance is above 4,500 on the S & P. Historically, the market gains 14.5% on average between the 20% threshold level and the next decline of 5% or more. And that usually happened over a five-month period. So I think, you know, this is a bit of a FOMO kind of a move.” Dot com parallels The latest stock market exuberance — fueled by all things related to artificial intelligence — even inspired some gurus to draw parallels with the late Clinton years’ dot com bubble. “Echoes of ’99?,” asked Wells Fargo head of equity strategy Chris Harvey in a Friday report that channeled Prince and was entitled “Party Like It’s 1999.” “We fear the Fed’s rate pause will allow uber-cap AI to go ‘next level,'” Harvey wrote. “If 1999/2000 is any guide, ‘new economy’ stocks will not fade until the economy and ‘old economy’ stocks do — which may not happen until the Fed takes rates to 6%+. We believe Fed’s action supports an intermediate rally in uber-caps, whose valuations are not outrageous vs. the SPX (and vs. 1999). Near-term overbought technicals imply a pause/pullback for the uber-caps, with a catch-up trade in” small- to mid-cap stocks. As if to illustrate the 1999/2000 parallel, Microsoft on Friday touched an all-time high, ending the week with a 2023 gain of more than 43% and a market capitalization approaching $2.6 trillion. Others are inspired by what they expect will be further gains in the fight against inflation, and a belief that the Fed won’t dare, or won’t need to, lift the fed funds rate above the current 5.00-5.25%. “Inflation is currently plummeting,” said Jay Hatfield, chief executive officer at Infrastructure Capital Management in New York. “Inflation peaked in June of last year and has been rapidly declining over the past 12 months. We forecast that the June data for Consumer Price Index and Producer Price Index will come in at approximately 3% and 0%, respectively. PPI is a leading indicator of inflation, and the fact it is going to fall to near zero should be a major warning sign for the Fed that it has tightened too far and too fast,” he said. Next week is a holiday-shortened, four-day trading span in the late June vacuum before second-quarter earnings start spilling out in July. FedEx reports its results on Tuesday, Darden Restaurants on Thursday and CarMax on Friday, the same day the June purchasing managers’ service and manufacturing indexes are released. No bull trap Or, as Stovall said, there’s nothing on the immediate horizon “likely to lead to a bull trap, meaning that this move is going to trap bulls and then drag them back down.” One note of caution about the short-term outlook, however, came late in the week from Jeffrey Hirsch, editor of the Stock Trader’s Almanac , who said to beware the week after stock options and stock index futures expire — as they did on Friday. Trading the week after is often treacherous, Hirsch said, with the Dow Jones Industrials falling in 27 of the past 33 years and the S & P 500 down in 23 of 33 years. Looking ahead, anyone banking on a summer rally in stocks should be mindful that historically it’s the weakest of all four seasons, Hirsch said. The almanac says winter rallies average 12.9%, versus 11.8% in the spring and 11.1% in the fall. Summer rallies bring up the rear, averaging 9.4%. Week-ahead calendar Tuesday 8:30 a.m.: Housing starts and permits (May) Earnings : FedEx, La-Z-Boy 11:45 a.m.: New York Fed’s John Williams speaks Wednesday 10 a.m.: Fed chair Jerome Powell delivers the Semiannual Monetary Policy Report to House Financial Services Committee 10 a.m.: Senate Banking Committee nomination hearing for Fed vice chair-nominee Philip Jefferson, Fed governor Lisa Cook and Fed governor nominee Adriana Kugler Earnings : Winnebago, Enerpac Tool Group, Avid Bioservices, Patterson Cos., KB Home Thursday 4:00 a.m: Fed governor Christopher Waller speaks in Dublin 8:30 a.m.: Initial jobless claims (week ended June 17) 10 a.m.: Fed chair Jerome Powell delivers Semiannual Monetary Policy Report to Senate Banking Committee 10 a.m.: Existing home sales (May) Earnings : Darden Restaurants, FactSet, Accenture, Commercial Metals Friday 9:45 a.m. S & P Global PMI composite (June) Earnings : CarMax — CNBC’s Michael Bloom, Fred Imbert and Alex Harring contributed to this report.
The family of a victim and several survivors of a mass shooting at a FedEx facility in Indianapolis filed a lawsuit against companies involved in the manufacturing, marketing and sale of the high capacity magazine used by the gunman who killed 8 people and injured several others in 2021.
The federal lawsuit, filed in US District Court in the Western District of New York, targets a gun distributor and magazine manufacturers, and alleges the companies recklessly marketed and sold their products to impulsive young men at risk of violence.
The gunman in the April 15, 2021, attack, Brandon Hole, 19, was previously employed at the facility and opened fire on his former coworkers before killing himself. About a year before the attack, Hole browsed White supremacist websites, CNN previously reported. His mother contacted the police in March 2020 because she was worried about his behavior and threatening statements he’d made after he purchased a gun, according to police.
The lawsuit was filed Thursday on behalf of the estate of Jaswinder Singh, who was killed during the shooting, Harpreet Singh, who was injured, and his wife Dilpreet Kaur, and Lakhwinder Kaur, who was also injured in the attack. They are each seeking at least $75,000 from the lawsuit and are asking for a jury trial, according to the complaint.
The lawsuit targets American Tactical Inc., an American firearms importer, manufacturer and seller, along with the company’s president and the director of marketing and purchasing. Schmeisser GmbH, a German firearms manufacturer; and 365 Plus d.o.o., a Slovenian company that designs, produces and distributes firearms accessories and other tactical equipment are also listed as defendants.
The three companies were involved in the manufacturing, marketing and sale of the 60-round high-capacity magazines that “have been used repeatedly to slaughter and terrorize Americans in horrific mass shootings since long before April 2021,” the lawsuit says.
The lawsuit claims these companies made these magazines easily accessible to Hole and targeted their marketing campaign to “a consumer base filled with impulsive young men who feel they need to harm others in order to prove their strength and who have militaristic delusions of fighting in a war or a video game.”
“This case is about what happens when companies recklessly design, market, sell, and distribute these accessories to the general public—indiscriminately—and without adherence to reasonable safeguards,” the lawsuit reads.
American Tactical declined to comment to CNN about the lawsuit. Lawyers for the other defendants did not immediately respond to requests.
Schmeisser GmbH manufactured the magazine used in the mass shooting and distributed it in the US through American Tactical and 365 Plus, the lawsuit claims.
“The high capacity of the magazine emboldened the shooter to commit the attack, knowing he had the ability to fire 60 rounds continuously without the need to pause to reload,” the lawsuit says.
The complaint says American Tactical promoted marketing videos that show men dressed in tactical vests similar to what Hole wore during the 2021 attack as they fire “a constant stream of bullets at unseen targets in various offensive, tactical operations.”
The lawsuit alleges the firearm companies placed an “unreasonably dangerous product on the market without sufficient safeguards to prevent its foreseeable unlawful use.”
The Brady Center to Prevent Gun Violence, the gun control advocacy organization that employs two of several lawyers representing the plaintiffs, wrote in a statement to CNN the nonprofit is “trying to achieve justice for these survivors and their family, and hold American Tactical, Inc. accountable for their irresponsible marketing and sales practices.”
“If you decide to sell such highly lethal products to the general public anyway, you need to be very careful about who you’re selling them to. As we allege in our complaint, defendants here have instead taken a hard turn and specifically marketed their highly lethal products to a dangerous class of individuals,” said Philip Bangle, the Brady Center’s senior litigation council.
Bloated warehouse inventories are an expensive pressure eating away at the bottom line of many companies, and for many, the excess supply and associated costs of storage won’t abate this year, according to a new CNBC Supply Chain Survey.
Just over one-third (36%) said they expect inventories to return to normal in the second half of this year, with an equal percentage expecting the gluts to last into 2024 — 21% saying a return to normal can occur in the first half of the year, and another 15% expecting normal activity by the first half of 2024. But uncertainty about inventory management is significant, with almost one-quarter (23%) of supply chain managers saying they are not sure when gluts will be worked off.
“We don’t expect significant decreases in inventory levels within our network in 2023,” said Paul Harris, vice president of operations for WarehouseQuote. “Several of our manufacturing clients are experiencing dead/bloated inventory challenges due to over-ordering in the container grid-lock from prior quarters. A majority have elected to keep the inventory on hand and are opposed to liquidating.
A total of 90 logistics managers representing the American Apparel and Footwear Association, ITS Logistics, WarehouseQuote, and the Council of Supply Chain Management Professionals, or CSCMP, participated in the survey between March 3-21 to provide information on their current inventories and the biggest inflationary pressures they are facing, and often passing on to the consumer.
What’s sitting in warehouses, and what companies are doing about it
Logistics experts tell CNBC that 20% of their excess inventory sitting in warehouses is not seasonable in product nature. Slightly more than half of survey participants said they would keep the items in warehouses. But a little over one-quarter (27%) said they are selling on the secondary market because inventories impact a company’s bottom line through elevated storage prices.
Harris told CNBC many clients with perishable goods are selling them on secondary markets to avoid destroying products. “However, if asecondary market is not an option, they are forced to destroy the product,” he said. “If it’s a consumable, they are donating the goods to take tax deductions.”
Investors are worried about the earnings and margin trends and expect Wall Street to revise estimates lower. The supply chain pressures will be among the factors that weigh on quarterly numbers.
“Inventory carrying costs continue to rise, driven by inflationary pressures and late shipments,” said Mark Baxa, CEO of CSCMP. “This means that with every day that passes, three things are happening … growing sales risk, margin pressure, and D&O [deteriorated and/or obsolete].”
Almost half surveyed said the biggest inflationary pressures they are paying are warehouse costs, followed by the “other” category, which includes rent and labor.
ITS Logistics told CNBC that many clients across industries have been using ocean containers, rail containers and 53-foot trailers for storage because distribution centers were full.
“These charges will start materializing in Q2 or Q3 financial results,” said Paul Brashier, vice president of drayage and intermodal at ITS Logistics.
The survey found 50% of respondents saying the average length of time they are using ocean containers for storage is over four months.
“We are seeing similar trends in our data and ecosystem,” Brashier said.
More inflation costs going to the consumer
Traditionally, warehousing costs and the associated labor costs are passed on to the consumer, increasing or sustaining the price of a product. Nearly half (44%) of survey respondents said they are passing on at least half of their increased costs, if not more, to consumers.
“It’s clear that supply chain challenges and all their associated costs continue to stir inflationary pressures,” said Stephen Lamar, president and CEO of the American Apparel and Footwear Association. “Given ongoing inventory concerns and the fragile nature of our logistics system, there are other pressures and uncertainty.”
His group is calling for West Coast port labor negotiations to be quickly finalized and for the government to “aggressively remove other cost pressures,” a reference to Section 301 tariffs on Chinese imports, which he said continue to make supply chains more expensive.
Manufacturing orders and the economic outlook
Recent data on manufacturing has shown a deterioration in the economy, with the ISM Manufacturing index in contraction level based on March data released this week. The U.S. services sector slipped closer to contraction in March, according to the ISM Services Index, with sharp declines in new orders, exports and price.
Looking at the health of manufacturing orders for the next three months, 40% of logistics managers surveyed said they are not cutting orders, while a little under one-fifth (18%) said they are cutting orders by 30%.
Inventory levels and consumer consumption are two factors influencing manufacturing orders.
These orders help gauge China GDP as it reopens from its strict Covid protocols, since the country relies on manufacturing and trade for its economic growth.
FreightWaves SONAR intelligence shows a slight uptick in ocean freight orders and recovery from the massive drop ahead of Lunar New Year, but the longer trend line remains a decrease in ocean bookings.
The inventory glut is affecting trucking logistics in multiple ways. Not only are trucks moving fewer containers from the ports, they are also moving less from the warehouses to the retail stores. Data from Motive, which tracks trucking visits to North American distribution facilities for the top five retailers by volume, shows a drop in truck visits from warehouses.
“The decline in visits to retail warehouses indicates weakness in consumer demand, but surprisingly may also be a sign of recovery in the supply chain,” said Shoaib Makani, founder and CEO of Motive. “With lead times to replenish inventory reduced from 2021 and 2022 highs, retailers are burning off existing inventories with the confidence that they will be able to replenish quickly.”
Even with orders increasing, the inventory headwinds are a source of concern for logistics experts.
“This survey confirms that we remain in an era of serious supply chain cost-to-serve challenges,” Baxa said. “Warehousing costs are contributing to these challenges that shippers are facing today and on the road ahead.”
FreightWaves and ITS Logistics are CNBC Supply Chain Heat Map data providers.
U.S. stocks ended lower Friday as worries about banking-sector stability reemerged following a bankruptcy filing by SVB Financial Group and the release of data showing banks borrowed $165 billion from the Federal Reserve over the past week.
How stocks traded
The Dow Jones Industrial Average DJIA, -1.19%
fell 384.57 points, or 1.2%, to close at 31,861.98.
The S&P 500 SPX, -1.10%
dropped 43.64 points, or 1.1%, to finish at 3,916.64.
The Nasdaq Composite COMP, -0.74%
slid 86.76 points, or 0.7%, to end at 11,630.51, snapping a four-day win streak.
For the week, the Dow fell 0.1%, the S&P 500 gained 1.4% and the Nasdaq climbed 4.4%, according to Dow Jones Market Data. The Dow booked back-to-back weekly losses while the Nasdaq saw its biggest weekly percentage gain since January.
What drove markets
U.S. stocks fell Friday as worries about the banking sector persisted.
“The markets are up and down all this week, and they’re moving typically in big amounts, because there really isn’t any consensus on how the strains in the banking system will play” into the economy, said Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute, in a phone interview Friday. Investors are trying to get a sense for how quickly the economy may be slowing and whether the problems in the banking sector will lead to an “accelerated slowing,” he said.
Concerns about the banking sector’s ability to withstand deposit flight reemerged Friday morning after SVB Financial Group SIVB, -60.41% announced it had filed for Chapter 11 bankruptcy protection. SVB is the holding company of Silicon Valley Bank , which was put into FDIC receivership last Friday.
On Thursday, First Republic Bank announced that it would receive $30 billion of uninsured deposits from a group of large U.S. banks. JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. were among the 11 banks that agreed to provide the deposits.
Meanwhile, Federal Reserve data released Thursday afternoon in New York showed banks borrowed a combined $165 billion from the central bank. Most of the borrowing occurred via the Fed’s discount window. But a small amount was also tapped through the Fed’s new Bank Term Funding Program that allows bonds trading at a discount to be used as collateral, at par value. The fact that borrowing through the discount window has soared to a record high was adding to the market’s concerns about the banking sector, analysts said.
First Republic Bank FRC, -32.80%
shares plunged 32.8% Friday, while Credit Suisse Group CS, -6.94%,
which earlier this week got a lifeline from the Swiss National Bank, closed 6.9% lower, according to FactSet data.
At least four major banks have put restrictions on trades that involve troubled Swiss lender Credit Suisse Group or its securities, Reuters reported Friday, citing people with direct knowledge of the matter.
“I think there are still a lot of questions right now,” said Mark Luschini, chief investment strategist at Janney, during a phone interview with MarketWatch. “Investors can’t seem to hold their enthusiasm for equities for longer than a 24-hour news cycle.”
It’s not hard to understand why investors are still so anxious about the banking sector given the surge in borrowing from the Fed, said Matt Maley, chief market strategist at Miller Tabak + Co.
“Given that banks borrowed over $150bn at the Fed’s discount window on Wednesday, which compares to $4.4bn the week before, one can understand why investors are worried that the situation might be a bit more dire than the authorities are admitting to right now,” Maley said in emailed commentary.
In economic news, the Conference Board said Friday that the U.S. leading economic index fell 0.3% in February, marking the 11th straight monthly decline. U.S. industrial production was flat in February, data released Friday by the Fed show.
Meanwhile, the University of Michigan’s latest reading on consumer sentiment showed consumers were more downbeat in March than at ay time in the last four months.
While stocks fell Friday, they finished the week mostly higher. The Dow Jones Industrial Average slipped 0.1% for the week, while the S&P 500 booked a 1.4% weekly gain and the technology-heavy Nasdaq Composite saw a weekly rise of 4.4%, according to Dow Jones Market Data.
Shares of PacWest Bancorp PACW, -18.95%
and Western Alliance Bancorp WAL, -15.14%
tumbled as regional banks continued to face pressure, with PacWest falling almost 19% and Western Alliance dropping 15.1%.
Shares of Microsoft Corp. MSFT, +1.17%
rose 1.2% as analysts saw the latest iteration of Chat GPT giving the tech giant an even greater edge. In other megacap tech names, Alphabet Inc.’s Class A GOOGL, +1.30%
shares gained 1.3% while semiconductor giant Nvidia Corp. NVDA, +0.72%
advanced 0.7%.
Shares of FedEx Corp. jumped after hours on Thursday after the package deliverer reported third-quarter results that beat expectations and raised its profit forecast, as it tries to battle weaker demand with aggressive cost cuts.
FedEx FDX reported fiscal third-quarter net income of $771 million, or $3.05 a share, compared with $1.11 billion, or $4.20 a share, in the same quarter last year. Revenue fell to $22.2 billion, compared with $23.6 billion in the same quarter last year.
US President Joe Biden meets with CEOs about the economy in the South Court Auditorium of the Eisenhower Executive Office Building, next to the White House, in Washington, DC on July 28, 2022.
Mandel Ngan | AFP | Getty Images
U.S. President Joe Biden has appointed the heads of Citigroup, United Airlines, CVS, 3M and FedEx, among other top executives, to sit on a White House advisory committee overseeing international trade.
The President’s Export Council gives recommendations and insight into the ways government policies impact U.S. trade performance. The group also provides feedback on how Biden’s trade policies are affecting businesses across sectors from industry and labor to agriculture.
D.C. businessman Mark D. Ein will chair the board. He currently serves as chairman of Lindblad Expeditions and Kastle Systems and is on the board of directors of Custom Truck One Source and Membership Collective Group. Walgreens Boots Alliance CEO Rosalind Brewer will serve at the council’s vice chair. She previously served as chief operating officer and group president of Starbucks and CEO of Sam’s Club.
The 25-member board includes: Dana Walden, co-chairman of Disney Entertainment; Jane Fraser, Citigroup CEO; Michael F. Roman, chairman and CEO of 3M; Rajesh Subramaniam, president and CEO of FedEx; Karen S. Lynch, president and CEO of CVS; John Lawler, chief financial officer of Ford; Gareth Joyce, CEO at Proterra; Brett Hart, president of United Airlines; Beth Ford, president and CEO of Land O’Lakes; and Qualcomm CEO Cristiano R. Amon.
The Export Council features expertise from labor, real estate, national security and law, and leaders of Fortune 200 companies. Biden has previously reached out to some of the executives for counsel on the state of the economy.
Other members include: Raymond E. Curry Jr., president of the UAW union; Rich Lesser, global chair of Boston Consulting Group; Patrick E. Murphy, a former congressman who is the chief investment officer of Coastal Construction Group; Robert G. Martinez Jr., international president of the International Association of Machinist and Aerospace Workers union; Daniel Rosen, CEO of real estate firm Rosen Partners; and Brett Isaac, co-founder and executive chairman of Navajo Power.
Other members of the council include:
Lisa Disbrow, a national security expert who served as the undersecretary of the Air Force;
Lacy M. Johnson, partner-in-charge of Taft’s D.C. law firm;
Juan Verde, strategist and consultant with stops at Santander Bank Investments and the World Bank;
Michelle W. Singer, senior vice president for political engagement at Comcast;
Farnam Jahanian, president of Carnegie Mellon University;
Paul A. Laudicina, chairman emeritus of the consulting firm A.T. Kearney; and
Deloitte Global CEO Emeritus Punit Renjen.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
A Southwest passenger jet and a FedEx cargo plane came as close as 100 feet from colliding Saturday at the main airport in Texas’ capital, and it was a pilot – not air traffic controllers – who averted disaster, a top federal investigator says.
Controllers at Austin’s international airport had cleared the arriving FedEx Boeing 767 and a departing Southwest Airlines Boeing 737 jet to use the same runway, and the FedEx crew “realized that they were overflying the Southwest plane,” Jennifer Homendy, chairwoman of the National Transportation Safety Board, told CNN Monday.
The FedEx pilot told the Southwest crew to abort taking off, she said.
The FedEx plane, meanwhile, climbed as its crew aborted their landing to help avoid a collision, the Federal Aviation Administration has said.
“I’m very proud of the FedEx flight crew and that pilot,” Homendy said. “They saved, in my view, 128 people from a potential catastrophe.”
“It was very close, and we believe less than 100 feet,” Homendy said.
Controllers had cleared the Southwest departure from runway 18 Left when the FedEx jet was about 3.2 nautical miles away, she said. Controllers also confirmed to the FedEx crew that it could land on 18 Left when the FedEx plane was 2.19 nautical miles out.
The NTSB in 2017 recommended widespread adoption of technology – known as Airport Surface Detection Equipment, or ASDE – designed to notify controllers and prevent this type of collision.
That system, Homendy said, played a role in preventing a runway collision last month between taxiing and departing aircraft at New York’s John F. Kennedy airport. But it is being used at only 35 airports and was not deployed at the Austin airport, she said.
“Air traffic control in this situation can see the FedEx plane on radar. They cannot in Austin see where Southwest is on the ground,” Homendy said.
NASHVILLE, Tenn. (AP) — Skateboard legend Tony Hawk says he will donate half of the proceeds of autographed photos of himself and BMX rider Rick Thorne to the memorial fund for Tyre Nichols.
“My proceeds from these will go to the Tyre Nichols Memorial Fund, which includes plans to build a public skatepark in his honor; as our worlds continue to grieve his loss,” Hawk tweeted Friday. “He was a talented skater among other admirable traits. Let’s keep his legacy alive.”
The photos can be purchased on Thorne’s website for $30. Only 1,000 copies will be available for sale.
Half of the proceeds from the autographed photos will go to Nichols’ memorial fund “to help his family out, and to build a memorial skate park in his name, honoring his love for skateboarding,” according to Thorne’s website.
He died Jan. 10 after police stopped him for what they said was a traffic violation and beat him. Video released after pressure from Nichols’ family shows officers holding him down and repeatedly punching, kicking and striking him with a baton as he screamed for his mother.
Six officers have since been fired and five of them have been charged. One other officer has been suspended, but has not been identified.
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This story corrects spelling of Rick Thorne’s last name.
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An earlier version of this report incorrectly said six officers had been charged instead of five.
