What happened
A strong jobs report has investors questioning how soon the Federal Reserve will be able to ease its rate hiking campaign. That's creating new worries about the health of the economy heading into 2023, and sending stocks into a tailspin on Monday.
Shares of United Parcel Service (UPS 0.47%) got caught in the downdraft, down as much as 3.7% on Monday.
So what
Through much of 2022, the market has moved based on sentiment about the Fed, and specifically about whether the central bank's rate-hiking campaign will throw the economy into a recession. UPS has largely moved with the broader markets, as the transportation giant does best when economic activity is robust and there is strong demand for shipping.
Friday's economic data gave investors more to worry about. The U.S. economy added more jobs than expected in November, and hourly wage growth was stronger than the estimate. That's likely to continue to fuel inflation, and mean that the Fed is going to need more rate hikes than some have hoped.
The Fed is trying to act surgically, doing just enough to cool inflation without pushing the economy into a recession. The more it has to act, the more risk there is that we will end up in a downturn that stifles demand for transportation services from UPS.
Now what
As discussed last week, there is plenty of evidence out there that UPS can weather whatever lies ahead and thrive once the economy begins to recover. Investors with a long time horizon will probably do well buying in here, although patience could be required.
The issue for the stock in the near term is that with so much uncertainty out there, it is hard to find a compelling reason to rush into the shares for now. It's hard to imagine the stock really taking off until we have more clarity about what the Fed will do, and what that might mean for the economy.
Until then, expect UPS shares to largely track the broader markets and to sell off on down days like Monday.
