What happened
Shares of United Parcel Service (UPS 1.51%) fell more than 5% on Wednesday, as investors continue to fear the COVID-19 coronavirus will lead to a global economic slowdown that will eat into shipping volumes. UPS also could soon get a change in the C-suite, adding to the uncertainty surrounding the stock.
So what
UPS and other shipping companies have been under pressure for weeks over concerns about falling shipping volumes. There was some concern about the health of the global economy even before the coronavirus outbreak, and investors are now worried the outbreak will slow economic activity in key parts of the world.
Image source: UPS.
The closely watched Cass Freight Index was down 9.4% year over year in January, an indication of the weakness in global shipping even before the coronavirus impact began to spread globally. The fear now is that the outbreak could exasperate that weakness, sending us into a full-fledged recession.
UPS shares were under further pressure due to a report in the Atlanta Business Chronicle saying that longtime CEO David Abney may retire soon. Abney has been CEO since September 2014 and has a strong reputation on Wall Street with investors.
Now what
Markets hate uncertainty, and the combination of continuing coronavirus concerns and the potential for a CEO change is more than enough reason for investors to run for the exits during a sell-off.
UPS shares are now down 24% year to date, and a potential recession is likely priced in. But until there is more clarity about how severe the coronavirus impact on global trade will be, and how long that impact will last, it is going to be hard for stocks like UPS to find a bottom.
