Brace For Stagflation After Fed’s Benevolence, Warns Analyst, Raising 5 Corporate Red Flags: ‘Inflation Is Transitory Mistake All Over Again’ – SPDR S&P 500 (ARCA:SPY)

The Federal Reserve announced Wednesday a deep 50 basis-point cut to its Fed funds rate, which is likely to ease the pressure on consumers. An analyst, however, sees a return of recession along with stagnation.

What Happened: “Get ready for stagnation,” said GLJ Research’s Gordon Johnson, adding that, this is the “inflation is Transitory” mistake all over again. To make his case, he noted four corporate announcements suggesting the near could be challenging.

China Drags Skechers: Skechers U.S.A., Inc. SKX, which designs, manufactures and distributes footwear, sees softness in China’s business. CFO John Vandemore said, at the Wells Fargo Consumer Conference, “We’ve definitely seen worse conditions unfold in China than we expected for the back half of the year, so I would expect the back of the year’s going to be more disappointing than what we had originally thought.” The shares reacted with a sharp tumble on Thursday, settling down 9.62% to $61.56

Rough Road For Mercedes-Benz: Also German automaker Mercedes-Benz Group AG MBGAF late Thursday said its 2024 earnings before interest and taxes will likely come in “significantly below” the previous year, citing a further deterioration in the macroeconomic environment, mainly in China. The automaker also said it expects its adjusted return on sales to be between 7.5% and 8.5%, down from its earlier forecast of 10% to 11%. The company’s shares listed on the Frankfurt exchange fell nearly 7%.

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FedEx Doesn’t Deliver: Package-shipping company FedEx Corp. FDX reported first-quarter earnings that fell year-over-year and missed expectations. The company reduced the high end of the full-year adjusted operating income guidance. The predicament was blamed on circumspect consumers favoring cheaper services over pricey and speedier options. The stock fell over 13% in premarket trading on Friday.

Lennar’s Underwhelming Quarter: Homebuilder Lennar Corp. LEN reported roughly 8% revenue growth to $9.42 billion and earnings per share were up 10% but the average sales price of houses fell.

More Cuts At Warner Music: Entertainment and record-label company Warner Music Group Corp. WMG said Thursday it plans to reduce its workforce by about 750 employees, representing 13% of its total headcount, more than the 10% expected earlier.

R-Word Still Floats Around: Chief Global Strategist of BCA Research Peter Berezin said in an X post that the 50 basis-point cut and another 50 bps reduction the central bank is penciling in before the year-end may not ensure a soft landing. He pointed out to the previous two rate-cut cycles when recession followed following 100 basis-point cuts.

The SPDR S&P 500 ETF Trust SPY, an exchange-traded fund that tracks the S&P 500 Index, fell 0.26% to $567.76, according to Benzinga Pro data. The ETF, however, is up nearly 21% so far this year.

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