FedEx results will shine light on economy

The package carrier is a leading indicator as investor focus returns to the domestic economy in the week ahead. Europe won't go away. The Fed will acknowledge a stronger economy. Best Buy, Joy Global, and Research In Motion report quarterly results.

By Charley Blaine Dec 9, 2011 10:56PM
Charley BlaineUpdated 3:10 a.m. ET Monday

Nobody -- except maybe the Germans and French -- likes the deal that is supposed to lead to a new world in Europe.

It's too focused on austerity. It's not clear if eurozone countries will be willing to give up some of the control of their domestic economies. The British certainly don't want any part of the deal.

But stocks rallied anyway Friday, with the Dow Jones industrials ($INDU) jumping some 187 points. Stocks may continue to rally in the coming week as domestic concerns take center stage again.

There's a big Federal Reserve meeting, several important economic reports and two widely anticipated initial public offerings. And one earnings report -- from package shipper FedEx (FDX) -- may shed some light on where the economy is headed.

FedEx expects its biggest day of the year on Monday as people and businesses rush to ship holiday packages. It reports fiscal-second-quarter results before Thursday's open, and its outlook for business in the United States and the world will be studied carefully.

Article continues below video.
Europe remains an issue and was weighing on trading in stock index futures early Monday. Moody's Investors Service said the apparent deal doesn't change anything and doesn’t diminish the risk of credit-ranking revisions. Decisions on the credit ratings on all eurozone countries could come in the first quarter, Moody’s said.

Why FedEx matters
When FedEx and its rival, United Parcel Service (UPS), see package volumes jump, that's bullish for the economy.

What FedEx and UPS have seen in recent quarters is lots of growth in business between the United States and Asia and modest growth in the U.S., which has struggled through a recession and a slowing economy.

But watch how FedEx phrases its guidance because it's raising prices 4.9% as of Jan 2. Listen to how it sees package volume growth. That will offer a sense of whether the uptick the domestic economy has seen will have strength.

FedEx stock has had a big fourth quarter, rising some 15%. For the year, it's down 10.3% after a third quarter that saw the shares sink 28.7%.

Analysts expect $1.52 a share in earnings, up from $1.16 a year  ago. Revenue is expected to rise 13.7% to $10.6 billion.

Markets for the week



12/9/2011

12/2/2011

% chg.

YTD chg.
Dow Industrials

12,184.26

12,019.42

1.37%

5.24%
S&P 500

1,255.19

1,244.28

0.88%

-0.19%
Nasdaq 

2,646.85

2,626.93

0.76%

-0.23%
Russell 2000

745.21

735.02

1.39%

-4.91%
Crude oil 

$98.68

$100.96

-2.26%

7.99%
(per barrel)











U.S. Dollar Index 

78.68

78.73

-0.06%

-0.77%
10-yr. Treasury

2.05%

2.04%

0.49%

-37.91%
Gold

$1,716.80

1,751.30

-1.97%

20.78%

Here are the other key events for the week.

Initial public offerings: 12 are due in the coming week, according to Renaissance Capital.The biggest are a deal expected to raise at least $100 million from online-game developer Zynga, which will trade with the ticker ZNGA,and upscale fashion retailer Michael Kors, which will trade with the ticker KORS. Kors is seen raising about $42 million. 

Tuesday: Earnings from Best Buy (BBY), financial-research vendor FactSet Research Systems (FDS) and education services vendor Learning Tree International (LTRE). Best Buy will command a lot of attention because it has emphasized electronics and has been struggling in the last few years.

Wednesday: Mining equipment maker Joy Global (JOYG) and payments authorizer Verifone Systems (PAY).

Thursday: In addition to FedEx, there are reports due from consulting giant Accenture (ACN), Adobe Systems (ADBE), credit-card company Discover Financial (DFS), Pier 1 Imports (PIR) and Research In Motion (RIMM).

Pier 1 raised its third-quarter earnings guidance to a range of 20 to 21 cents a share. It had previously projected 18 cents a share.  Shares are up 31% this year.

Research In Motion is under tremendous competitive pressure from Apple's (AAPL) iPhone and phones using Google's (GOOG) Android platform. Shares are down 72% this year alone.

The Fed and other reports
The Fed rate-making body, the Federal Open Market Committee, meets Tuesday to discuss interest rates and policy changes it might make to boost the economy.

It will concede that the economic data have improved of late. Private-sector employment has been growing, and jobless claims are below 400,000. Retail and auto sales are improving. Manufacturing continues to be fairly strong.

The weak link will be that job growth is anemic at best, and housing continues to struggle under the weight of heavy foreclosures.

It will leave its key federal funds rate at 0% to 0.25%. It may discuss another round quantitative easing -- buying securities to boost the economy. But don't expect a lot of action.

Also due in the week ahead:
Retail sales for November, due Tuesday from the Commerce Department. Look for a decent gain, set up by the Black Friday holiday shopping.

Jobless claims for the week of Dec. 10, due Thursday from the Labor Department. Look for some improvement, helped by staffing for holiday shopping.

Producer Price Index for November, due Thursday from the Labor Department. Inflation pressures are easing, IHS Global Insight says. Look for 0.2% heading growth and 0.1% core growth.

Industrial production for November, due Thursday from the Commerce Department. Look for a small gain, if only because automakers had a big month in October.

Empire State and Philadelphia Fed manufacturing surveys, due Thursday from the Federal Reserve Banks of New York and Philadelphia. These should show some modest growth from the lows of the summer.

Consumer Price Index for November, due Friday from the Labor Department. Look for a small headline loss, due to lower gasoline prices.

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