Airlines, railroads, shippers and truckers are among this quarter’s worst-performing U.S. stocks, and their performance may foreshadow more widespread losses.
The Dow Jones transportation average fell last week for a sixth straight week, the longest losing streak since March 2003.
Continental Airlines Inc. had the steepest retreat as news of a foiled plot to blow up planes bound for the U.S. from the U.K. sent airline shares tumbling.
United Parcel Service Inc., the biggest company in the 20-stock average by market value, recorded its worst one-day drop ever in July after reducing its profit forecast.
The industry’s slump suggested to some investors that economic growth is slowing. For followers of Dow Theory, an indicator developed in the 19th century, the decline set off a warning that the market may be poised to fall.
“A significant deterioration in transports will turn up in industrial earnings,” said Andy Engel, an analyst at Leuthold Group in Minneapolis who helps oversee $2 billion. “It will bring the whole market down.”
The Dow transports last week tumbled 5.4 percent, its biggest decline in 14 months, to 4,141.62 as concern that the Federal Reserve’s interest-rate increases may restrain economic growth sent share prices lower.
The Dow Jones industrial average slipped 1.4 percent for the week, to 11,088.03, and has lost 0.6 percent this quarter. The Standard & Poor’s 500 index retreated 1 percent to 1,266.74, and the Nasdaq composite index slumped 1.3 percent to 2,057.71.
For the third quarter, every company in the transportation average has dropped except Overseas Shipholding Group Inc., the largest U.S.-based owner of oil tankers. The average has fallen 16 percent, which would be the worst quarterly loss since 2002.
Continental, the fourth-largest U.S. airline, plunged 17 percent last week. AMR Corp., the owner of American Airlines, sank 14 percent. Both stocks are down 26 percent this quarter.
The third-quarter declines are the biggest among the average’s members aside from a 30 percent drop in Expeditors International of Washington Inc., the country’s second-biggest manager of freight shipments. J.B. Hunt Transport Services Inc., the third-largest U.S. trucking company, has lost 23 percent.
UPS, the world’s largest package-delivery company, has fallen 19 percent. The stock plunged 10 percent on July 25, when the Atlanta-based company said earnings growth for 2006 would be “at the low end” of the 11 percent to 16 percent range set in January. The loss was the biggest since UPS went public in 1999.
Union Pacific Corp. has slipped 15 percent even though the biggest U.S. railroad’s second-quarter profit and third-quarter forecast beat estimates.
The presumption that transportation stocks are a harbinger for U.S. economic and stock-market performance dates to the late 1800s, when The Wall Street Journal’s co-founder, Charles Dow, created the industrial and transportation averages. Dow argued that when growth at manufacturers slows, railroads and other transporters get less business.
