Posted by: Ben Steverman on May 7, 2008
Transportation stocks have done well this year — the Dow Jones Transportation index is up almost 14% from the beginning of the year. Transport stocks are often seen as a good gauge for economic prospects. Pessimistic at the end of 2007, investors in transport stocks seem to be betting on a strong second-half recovery for the U.S. economy.
Today, however, Wall Street’s mood darkened: The broader market fell almost 2% and the transportation index dropped 3%.
For most of this year, railroad stocks and trucking stocks have tracked each other closely.
But while railroad stocks (measured by the Dow Jones U.S. Railroad Index) dropped 2.7% today, trucking stocks (the Dow Jones U.S. Trucking Index) plunged 4.5%.
Why the difference? Today the price of oil rose another $2 per barrel, getting awful close to $124 per barrel. This hits truckers harder than railroads because trains are far more energy efficent than trucks.
Trucks are “three times more fuel intensive,” according to Lee Klaskow of Longbow Research.
There’s another reason railroads might be favored by investors: The freight they handle is arguably less sensitive to an economic slowdown. “Railroads tend to haul more defensive freight than trucks, in our view,” Klaskow wrote May 6.
For more on transportation stocks, check out Eric Roseman’s interesting post on the topic.