The Dow Jones Transportation Average took another deep dive on Thursday, with the biggest drag change in the index’s rail components following rebates to Citigroup, citing concerns about a slowdown in demand.
The Dow carries DJT,
it sank 213 points, or 1.6%, in the afternoon, towards the minimum of 14 months. The index outperformed its sister index, the Dow Jones Industrial Average DJIA,
which fell 258 points, 0.8%.
Among the major transportation losers, Union Pacific Corp. shares UNP,
fell 3.8%, CSX Corp. CSX,
fell 2.9% and Norfolk Southern Corp. NSC,
it sank 2.9%. The combined price declines in these stocks accounted for about 100 points in the fall in Dow transportation.
All three rail operators were downgraded to buying neutral by Citigroup analyst Christian Wetherbee.
On Wednesday, when Dow shipments plunged 7.4 percent while Dow industrials fell 3.6 percent, it was truck stocks that acted as anchors, according to Target Corp.
cited transportation costs and supply chain disruptions for its large loss of profits.
Wetherbee said he had been bullish on railroad stocks amid weak trucks for the start of the year, as Wall Street saw the rails as a relatively safe haven in the current environment of rising inflation and geopolitical uncertainty.
Don’t miss it: CSX, Union Pacific gains to show if railways really offer a relative response from the turbulent transportation sector.
Wetherbee said it is this superior performance, in addition to Street’s expectations for maximum profit growth, that leads him to believe that the performance of the railway stock will be relatively limited in the future.
“We entered 2022 recommending the group and it has performed better, but we believe that a more selective / prudent approach is warranted given the warning signs for goods and persistent service problems, which could lead to a delayed operational reaction to a real recession, “Wetherbee wrote in a note to customers.
While not fully incorporating a full recession into its estimates, it does believe that consumer spending “pivots significantly” toward services and away from goods, which would hurt freight carriers.
“For rails, volume is flattening in 2023 and incremental margins are slowing along with prices,” Wetherbee wrote.
Elsewhere on Dow Transportation, Avis Budget Group Inc.’s CAR shares,
it fell 4.6% on Thursday, after diving 12.5% on Wednesday.
Among the transports they won on Thursday were the components of the airlines. JBLU shares of JetBlue Airways Corp.
led the group with an increase of 3.3%, following the purchase goal of Spirit Airlines Inc. SAVE,
increased its shareholders to reject the public offering launched earlier this week.
In addition, the shares of Alaska Air Group Inc. ALK,
gained 0.9% and Delta Air Lines Inc. DAL,
rose 0.2%. Meanwhile, United Airlines Holdings Inc. UAL shares,
shares of American Airlines Group Inc. fell 0.1% AAL,
lost 0.7% and Southwest Airlines Co. share LUV,