Is the U.S. stock bull market sustainable or is a potential downturn on the horizon? FedEx earnings report will shed light.

From the lens of the Dow Theory, a framework that analyzes the stock market, FedEx’s recent earnings report has the potential to shed light on the current boom in the market, indicating how long this upward trend may continue. The Dow Theory, devised by Charles Dow in the early 20th century alongside the creation of the Dow Jones Industrial Average and the Dow Jones Transportation Average, posits that a genuine market trend can only be confirmed when the movements of both the industrial and transportation indices align. However, this year has seen a lack of such synchronization, with the Dow Jones Industrial Average reaching new highs while the transportation index remains stagnant.

The observance of the gap between the Dow and the transportation index has raised concerns, as historically such disparities have been precursors to crises such as the 2008 financial crash, the 2020 market downturn due to the COVID-19 pandemic, and the tariff turmoil earlier this year. The notion behind the Dow Theory is logical, as companies involved in freight and passenger transportation tend to thrive during periods of economic growth. Consequently, their struggles are often interpreted as early signs of market challenges. FedEx, being a significant player in this sector, attracted significant interest on Wall Street with its latest earnings release.

Courier companies have experienced a loss of momentum this year due to the impact of the Trump administration’s tariffs on freight demand. FedEx and United Parcel Service have seen declines in their stock prices, with FedEx falling by 20% and UPS dropping by 33%. This contrasts with the S&P 500 and Dow Jones Industrial Average, which have shown gains, further emphasizing the transportation sector’s struggles. Analysts are anticipating modest growth in FedEx’s revenues and earnings per share in their upcoming report, although the market response is likely to hinge on their outlook for the upcoming holiday season.

Of particular concern is the cancellation of the de minimis exemption by the US government, which previously allowed duty-free entry for packages valued at $800 or less. This reversal has impacted courier companies like FedEx and UPS, further complicating their operations and financial outlook. Investors are keen to hear how FedEx plans to address this issue, as it could significantly influence their performance moving forward.

While the Dow Theory continues to sound alarms, some argue that its relevance in the digital age may be diminishing. The theory fails to account for companies like Amazon and Walmart, which operate their own extensive logistics networks, excluding their data from the traditional transportation indices. Nonetheless, experts believe that combining the Dow Theory with other economic indicators can offer a more comprehensive assessment of the current economic and market conditions.

In a time where various indicators are pointing towards a bearish trend, FedEx’s earnings report holds the potential to either counter these negative signals or confirm them further. The market awaits the outcome of this report to gauge the trajectory of the stock market and economy.