Stocks of companies in the transportation sector have gone from record highs in mid-September to down more than 10%. The Dow Theory holds, more or less, that the overall market will follow along behind Transports. That’s not a great sign for investors. Akane Otani writes in The Wall Street Journal:
The transports had rallied this summer and hit a record in mid-September, buoyed by strong economic data, as well as increased demand for freight services among retailers and consumers.
But the sector has been caught in the broader-market slide, pulling the Dow Jones Transportation Average—which tracks the performance of 20 large U.S. airlines, truckers, railroads and shippers—down more than 10% from its Sept. 14 high.
That puts it firmly in correction territory, alongside the Russell 2000 index of small-capitalization companies, the KBW Nasdaq Bank Index and the Nasdaq Biotechnology Index.
The slump bodes poorly for not just the transports but also potentially the stock market as a whole: Believers in the so-called Dow Theory say weakness in shares of companies that transport raw goods and materials can point to turmoil for the broader market.
Some of the group’s woes stem from industry-specific issues. United Parcel Service Inc. said Wednesday that profit fell in its domestic-package business in the third quarter, hurt by higher pension costs and expenses related to adding new buildings to its network. Shares of the company have slid 9.5% this year.
Read more here.