Will the bull market on US stocks continue or is a trap approaching? The answer will be revealed tonight with the release of FedEx Corporation's (FDX.US) financial report.

In the "Dow Theory" stock market analysis framework, the financial report released by FedEx Corporation (FDX.US) on Thursday may provide clues for the current record-breaking stock market, revealing how long this upward trend can continue. The Dow Theory was proposed by Charles Dow in the early 20th century, who also invented the Dow Jones Industrial Average and Dow Jones Transportation Average. The core idea of this theory is that the trend of the industrial and transportation indices must confirm each other (i.e. one goes up/down, the other follows suit) in order to confirm a true market trend. However, this "confirmation" has been absent this year: the Dow Jones Industrial Average continues to break records while the transportation index continues to struggle. From the perspective of the Dow Theory, the current market trend has shown ominous signals. Since 2005, the difference between the Dow and transportation index has only reached the current level during four periods: the 2008-2009 global financial crisis, the market crash caused by the COVID-19 pandemic in 2020, and the tariff panic in April this year. There is a broader logic behind this theory: freight and passenger transportation companies are usually the main beneficiaries of strong economic growth, so when these companies are in trouble, it is often seen as a signal that the market is about to encounter obstacles. As the second largest component of the transportation index, the financial report of FedEx Corporation has naturally attracted close attention from Wall Street. "FedEx Corporation, United Parcel Service (UPS.US), Delta Air Lines, Inc.(DAL.US) and other airlines are all significant companies and can be seen as the 'barometer' of economic health," said Tyler Rich, editor and technical analyst at Sevens Report. Express sector cooling down Due to the impact of the Trump administration's tariff policies suppressing freight demand, Wall Street's attitude towards express stocks has continued to cool down this year. Since 2015, FedEx Corporation's stock price has fallen by 20%, making it one of the 50 worst-performing stocks in the S&P 500 index. Meanwhile, UPS's stock price has plummeted by 33%, hitting near-low levels since 2013, becoming the worst-performing component stock in the Dow Jones Transportation Average - its strategy to reduce cooperation with Amazon.com, Inc. has further exacerbated market pessimism towards the stock. In stark contrast, the S&P 500 index has risen by 12% this year, the Dow has risen by 8%, while the Dow Jones Transportation Average has fallen by 2.5%. Analysts predict that FedEx Corporation will disclose a slight increase in revenue and adjusted earnings per share in its first quarter of fiscal year 2025. However, the market's reaction to the stock is likely to depend on whether the company believes that its busiest "holiday season" (end-of-year shopping season) will see a business rebound. Currently, FedEx Corporation has only released this quarter's performance forecast, providing no guidance for the longer term; UPS has already abandoned its full-year performance expectations. "This earnings conference call will be crucial," said Derek Malakie, managing director at SLC Management. Impact of canceled de minimis exemption policy Investors are particularly concerned about how FedEx Corporation will respond to the impact of the Trump administration's cancellation of the "de minimis exemption" policy. This policy previously allowed packages valued at $800 or less to enter the US duty-free. In May this year, the US government first closed this "loophole" for packages from mainland China and Hong Kong, impacting FedEx Corporation and UPS at the time; on August 29, the policy was fully abolished for packages from other global regions, putting more pressure on express companies. CFRA analyst Devin Delong pointed out in a report to clients last week: "For investors, FedEx Corporation's management's stance on the 'de minimis exemption cancellation' is likely to be a key focus of this financial report." However, from another perspective, FedEx Corporation's stock price has fallen to low levels, so even if the financial report is not "bright", it may still trigger a rebound. Citi Group analyst Ali Rossa said, "I can't remember when investors were so pessimistic about UPS and FedEx Corporation, and this sentiment is already reflected in stock valuations. To see a significant rise in these stocks, there is no need to make overly aggressive assumptions about their historical performance or valuation." Meanwhile, the warning signal from the Dow Theory continues. However, some strategists believe that in the digital age, this theory born a century ago may be lacking in value - for example, it does not cover large vertically integrated retailers like Amazon.com, Inc. and Walmart Inc., which have their own logistics systems and their transportation business data is not reflected in the Dow Jones Transportation Average. Joe Mazzola, director of trading and derivatives strategy at Charles Schwab Corp, asked, "Where do most people order goods from? The logistics data of Amazon.com, Inc. won't show up in the Dow Jones Transportation Average." Nevertheless, Rich from Sevens Report still believes that the Dow Theory should be used in conjunction with other economic indicators to fully assess economic and market trends. Currently, other indicators are also showing bearish signals: steepening of the US Treasury yield curve, slight widening of credit spreads, and the ratio of gold to oil prices reaching its highest level since 2020. Now, the financial report of FedEx Corporation has the opportunity to break these negative trends or further confirm them. Rich said, "If Charles Dow were still alive and saw the divergence trend between the Dow and transportation indices, along with the performance of the S&P 500 index, I believe he would make this judgment: 'This is a huge bull market trap.'"