By Paul R La Monica, CNN Business
Here’s a promising sign from Wall Street: Transportation stocks are leading the stock market this year, and that could bode well for the broader economy.
The Dow Jones Transportation Average, a group of 20 stocks that includes major railroads, truckers, airlines, and freight companies, is up about 7% this month and is flat for the year.
Meanwhile, the better-known Dow Jones Industrial Average, which includes blue chips like Apple, Coca-Cola, and Disney, is down 5% in 2022 as investors grow increasingly nervous amid rising interest rates and inflation.
When the Dow outperforms the rest of the market, it is often viewed as a positive macroeconomic indicator.
This means consumers are buying a lot of things from Amazon and Walmart that need to be shipped to warehouses and retailers. And it’s a sign that people are traveling again, both for pleasure and for business.
Rental car company Avis Budget, railroad Union Pacific, trucking company JB Hunt and airlines Alaska Air, Southwest and JetBlue are among the top performers in transportation stocks this year.
With energy prices soaring, the strength of transportation stocks is even more remarkable. Oil prices in the United States are up more than 50% to around $115 a barrel.
Of course, potential problems for the sector remain. These include supply chain problems, trucker labor shortages and the consequent need to increase wages, and a recent spike in Covid cases.
Economic headwinds, but consumers continue to travel and shop
However, many transport companies have been able to withstand this pressure as the broad economic recovery in 2021 has offset much of the industry’s challenges.
“Demand for travel continues to move in the right direction,” said Andrew Harrison, Alaska Airlines’ chief revenue officer and chief commercial officer, when announcing the company’s January results.
“Spring and summer travel should be strong on the leisure side and benefit from further development of business and international travel,” Harrison added.
Americans are also buying more of everything, which is good news for railroads, truckers, and other shipping companies.
“Consumers are flush … they are financially healthy. As long as their confidence isn’t shaken, they seem to keep buying year-round,” Union Pacific CEO Lance Fritz said on the company’s January conference call with analysts.
“A lot of my industry peers are pretty confident that their marketplaces are looking pretty good to them,” Fritz added, saying executives in the housing and construction markets remain upbeat about the outlook for 2022.
Trucking company JB Hunt is also optimistic despite the difficulties in finding drivers. “For our customers as a whole? I would say demand for all of our services is very strong,” Chief Commercial Officer Shelley Simpson said during the company’s recent conference call in January.
The challenges in the supply chain are not hurting shippers too much either.
“Consumption trends remain high and retail and e-commerce demand remains strong,” Matthew Cox, CEO of ocean freight and logistics company Matson, said during an earnings call with analysts in February.
Matson shares are up 33% this year, making it one of the top performers on the Dow Jones Transportation Average.
But not all transport companies benefit from the upswing. FedEx shares are down nearly 15% this year, making the company one of the worst performers on the DJT. FedEx reported earnings last week that missed forecasts. The company has been hit by rising labor costs and higher fuel prices.
The CNN Wire
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