U.S. stocks are trying to get back on track, but there’s worry about the economy, especially with transportation shares going down. The S&P 500 index, a key measure of the stock market, gained a little this week after falling for four weeks straight. Last week, it officially hit a correction, meaning it was down more than 10% from its highest point in February.
The Dow Jones Transportation Average, which includes companies like airlines, trucking firms, and railways, went down this week as well. Since its peak last November, this index has fallen over 17%. Chuck Carlson, the CEO of Horizon Investment Services, says this decline is troubling because it can suggest future economic troubles. Investors are worried about slowing growth, partly due to uncertain trade policies from former President Donald Trump.
This week, the Federal Reserve cut its growth forecast for the U.S. economy to 1.7%, down from 2.1%, citing high uncertainty. This year, the Dow Transports index is down 8%, which is twice as much as the S&P 500’s drop. Weakness in the index is widespread: FedEx’s stock is down 18%, and UPS is down about 9%. Trucking companies like Landstar and JB Hunt have also dropped over 12%. Airlines are seeing even bigger losses; Delta and United Airlines are down more than 20%, and American Airlines has lost about 35% this year.
Because many transportation companies deal with shipping goods across the country, the Dow Transports index can provide hints about consumer spending. Matt Maley, of Miller Tabak, mentions that as this index declines, it supports weaker economic data that Wall Street is observing.
Investors often look at both the Dow Transports and the Dow Jones Industrial Average together to understand market trends, known as Dow Theory. The Dow Industrial index is down 1% this year and about 7% from its record high in December.
Other indexes watched by investors have seen declines too. The Russell 2000, which tracks smaller companies that are more affected by the U.S. economy, is down over 15% from its November high. The Philadelphia Semiconductor Index, which includes companies making important tech parts, is down more than 22% from its peak in July.
Matthew Miskin from John Hancock Investment Management says that these declines show signs of weakness in the U.S. economy. Next week, important reports on consumer feelings and inflation will be released, which could give more insights. Also, tariffs are a big topic, as the Trump administration plans new tariffs on April 2, raising concerns about the economy and possibly increasing the volatility of transportation stocks.
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