UPS Takes a Stab at the Economy, says Growth Appears To Be Slowing

© David Goldman/AP Photo In this June 20, 2014 photo, United Parcel Service driver Marty Thompson steps off a truck while making a delivery in Cumming, Ga. UPS reports quarterly earnings on Tuesday, July 29, 2014.
© David Goldman/AP Photo In this June 20, 2014 photo, United Parcel Service driver Marty Thompson steps off a truck while making a delivery in Cumming, Ga. UPS reports quarterly earnings on Tuesday, July 29, 2014.

United Parcel Service has fired warning shots across the bow of the Federal Reserve and the stock market by saying on Tuesday that U.S. economic growth appears to be slowing.

The package-delivery giant’s cautious outlook runs counter to what Fed Chairwoman Janet Yellen said earlier this month, when she told Congress she expects the U.S. economy to keep strengthening enough for the central bank to raise interest rates “at some point this year.” The Fed’s outlook could become clearer when it releases its latest monetary policy statement on Wednesday.

It also suggests investors should take the relative weakness in UPS stock, as well as the Dow Jones Transportation Average, more seriously, as a warning that a much bigger selloff may be on the horizon for the broader market.

“If you just look at in January, the GDP forecast we thought was going to be about 3.1%. Now the thinking in July is about 2.3%, so let’s say a pretty significant decrease,” said UPS Chief Executive David Abney in a conference call with analysts, according to a transcript provided by FactSet. “Retail has been uneven and we saw it soften a little bit in June. And so that’s the reason we’re cautious.”

UPS stock  climbed 5.2% in afternoon trade, after the company reported second-quarter results, but it was still down 10% year to date, while the S&P 500 index  was up 1.6%. Read more about UPS’s second-quarter report and full-year outlook.

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Source: MarketWatch | Tomi Kilgore

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