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FedEx Tells You All You Need to Know


The FedEx pre-announcement yesterday evening was the proverbial "shot heard round the world," and what makes it so important is the fact that management was not even close to where they thought they would be just 90 days ago, they cut earnings expectations for next quarter in half, and withdrew guidance for 2023. In addition to cost pressures, the CEO stated that we are headed to a recession. It was also interesting that business worsened in the last couple of weeks, i.e., "[M]acro-economic trends significantly worsened later in the quarter…given the speed at which conditions shifted, first quarter results are below our expectations…we are aggressively accelerating cost reduction efforts."

Next-Day Airball It's pretty clear based on FedEx's business, which touches basically every other business, that economic activity is decelerating. The other takeaway that's not obvious just from this report is that margin pressure across corporate America is going to increase and that will put downward pressure on earnings.

The net of all of that was the market opened with a thud, losing 1.5% or so right off the bat. From there the Fed-trained stock bulls bought the dip in Pavlovian fashion before we started sideways-to-downward choppiness. When I had to leave, with 90 minutes to go, the Nasdaq was the downside leader, off almost 2% (but I doubt that is where it closed).

Away from stocks, green paper was about flat, fixed income was initially weaker then bounced a little based on stock weakness, with gains on the shorter end and losses for long bonds. After being weaker overnight, the metals turned to green in New York (though they came off their best levels), with silver gaining 1% and gold 0.5% (when I left). The miners were modestly higher.

Exeunt, Pursued By a Bull? I think it's worth pointing out that coming into yesterday, open interest in gold for December was about 387,000 contracts and in the first couple of hours the volume was roughly 200,000. So, there was a massive amount of selling and to me it looked like either stops were hit or guys were pressing shorts. In other words, it was urgent selling, and if it was the latter, that means there's a vulnerable group at these price levels.

It's also worth pointing out that the DSI got to 7. While having no one bullish doesn't guarantee a rally, they often start from these levels. Then again, with the FOMC meeting next Wednesday, we may have to get past that to see anything meaningful on the upside, assuming that's what we're due for.

Singin' In the Rain In company-specific mining news, New Gold announced an update on developments at Rainy River, which was positive and explains why the stock has traded well recently in the wake of weak metals prices. Agnico Eagle announced a joint venture with Teck. I'm not quite sure what its game plan is there because it's a base metal mine, but I'm sure they've got something intelligent that they're up to. We will find out more soon, I hope.

Lastly, Pan American released an update yesterday on the La Colorado skarn reporting that the amount of metal increased substantially, though grades were lower. I'm not sure exactly how to piece it all together, but I'm going to see Ross Beaty this weekend and I'll have an update on Monday.

Positions in stocks mentioned: long NGD, AEM, PAAS, PAASF.