Shares of transportation stocks are lagging behind the broader U.S. stock market, reflecting rising investor concerns of a recession following weaker demand for goods, travel and materials, while underscoring how economic uncertainties could choke off a strong run for the transportation industry.
Among the transportation stocks, shares of Norfolk Southern Corp. NSC tumbled 16.9% after one of its freight trains derailed in East Palestine, Ohio, leading to the release of toxic chemicals on Feb. 3. Union Pacific Corp. UNP shares have dropped by 7% since early February, while shares of Avis Budget Corp. CAR were down 22.7% over the same period, according to Dow Jones Market Data.
Weighing on the transportation sector are worries about weaker demand for goods and a potential global recession, which are widely expected as a result of the Federal Reserve’s aggressive monetary tightening. “It’s a classical margin squeeze,” Tunkel told MarketWatch in a phone interview. “They cannot charge their customers because they don’t have pricing power, but at the same time, they have to pay their workers and pay whatever it takes to maintain their fleet…It’s really the consequence of the Fed raising interest rates and slowing down the economy.”