FedEx shares plunged 21.6% in afternoon trading Friday to a two-year low. The $44.25 price decline shaved about 270 points off the Dow Jones Transportation Average , accounting for more than one-third of the Dow transports 774-point, or 5.7% drop.
FedEx Corp.’s profit warning has cast a pall on the broader stock market, as a record plunge in the package delivery giant’s stock has helped trigger one half of a Dow Theory “sell” signal.
The Dow transports’ selloff is sending an important message about the health of the broader stock market, given that the index is viewed by many as a leading economic indicator. There’s a saying on Wall Street that the companies in the Dow transports “take” to buyers what the companies in the Dow Jones Industrial Average DJIA, -0.63% “make.”
The Dow transports’ new low follows a big 18.2% bounce off the June low to the mid-August closing high. But since that high was well below the first recovery high seen in March, which in turn was below the November 2021 record close, the index has continued a pattern of lower lows and lower highs, which many Wall Street chart watchers say defines a bear market.
First, the Dow industrials and Dow transports must suffer significant selloffs after reaching new highs — Check. The respective June closing lows marked a 24.4% decline in the Dow transports from its record close in November and an 18.8% drop in the Dow industrials from a January record close.
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