FedEx might offer the clearest look at the disconnect between the soaring stock market and the listless global economy.
The world's largest freight carrier posted a 45% drop in its fourth quarter profits and offered its investors a cautious outlook for 2014, noting that customers are looking for lower-cost carriers internationally. FedEx said its outlook was based on expectations of just 2.3% GDP growth for the United States.
So how did the market respond? FedEx's (FDX) stock jumped more than 3%.
This week? More like this year! All three major stock indexes are up between 15% and 17% in 2013 even though few economists are predicting robust earnings growth.
To be fair, FedEx did beat analysts' expectations. But with its stock up more than 12% this year, the jubilant response from investors to a decidedly blah outlook shows that investors may be more interested in what the overall market is doing as opposed to specific company fundamentals.
Investor sentiment about FedEx didn't spill over to its top rival though. Shares of UPS (UPS) were down slightly.
FedEx has been "realigning" its business for some time, and that does seem to be helping earnings. The company has been cutting staff through what it euphemistically called a "voluntary employee separation program."
Investors don't seem to think it's dead anymore.
This article was published in the April issue of Money magazine.
This may be an online, on-demand world, but as long as businesses still need to ship stuff to customers, transportation stocks will remain a key barometer for investors. That's why Dow Theory, a market-timing indicator rooted in the smokestack economy of the late 19th century, remains relevant in the digital age.
This once-popular gauge tracks the Dow Jones industrial MOREPaul R. La Monica - Mar 14, 2013 10:57 AM ET
Packaging and shipping company United Parcel Service (UPS) isn't doing much for the broader stock market today.
While investors cheered UPS's third-quarter earnings, sending the stock up more than 2% Tuesday, it wasn't enough to offset the other dismal earnings reports coming out. U.S. stocks have sold off all day after Dow components DuPont (DD), United Technologies (UTX) and 3M (MMM) issued disappointing reports.
UPS took the middle road, not really MOREMaureen Farrell - Oct 23, 2012 1:45 PM ET
|Premarket: Dow near 26,000; BP losses; U.S. dollar weakness|
|Amid criticism over Aziz Ansari piece, Babe editor stands by story|
|Why you'll want to double check your paycheck in February|
|Will U.S. shale ruin the oil party (again)?|
|Carillion: Construction firm with 43,000 employees collapses|