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.
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