Transports Jump as Oil Retreats

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Railroad in motion at sunset. Railway station with motion blur effect and colorful sky with clouds. Industrial concept background. Railroad travel, railway tourism. Blurred railway. Transportation

Most of the big indexes were down yesterday, but not Transports.

The Dow Jones Transportation Average ($DJT) rose more than 1 percent. Digging deeper with TradeStation’s ever-useful RadarScreen®, we find that three of the six best-performing sub-indexes were related to transportation:

  • DJ US Airlines ($DJUSAR) +1.76%
  • DJ Trucking ($DJUSTK) +1.5%
  • DJ Railroads ($DJUSRR) +1.32%

It appears that a few potentially positive factors are at play. For airlines, it’s all about oil. Investors have punished the group this month because it hasn’t been able to hikes fares as fuel costs rise. But oil’s down for three straight sessions as crude inventories grow. Further weakness in energy costs could bolster airline profits.

Railroads and truckers, on the other hand, have enjoyed pricing power. Not only have big firms like United Parcel (UPS) and Union Pacific (UNP) reported strong results. Several big customers of transport services like TJX (TJX) and Deere (DE) complained about higher shipping costs in their quarterly reports. Federal Reserve policymakers noticed the same thing at their last meeting, according to their recent minutes.

In conclusion, this isn’t a recommendation and everyone needs to do their own homework, but some things may be shaping up positively for transports.

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David Russell is VP of Content Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.