Are Transports Losing Their Barometer Status?

As earnings season accelerated last month, investors buzzed about solid showings from "old economy" stalwarts like Coca-Cola (KO), Philip Morris (PM), General Motors (GM), and other firms our great grandparents would know. AI may be fueling Wall Street's rally, but upbeat results from soda, cigarette, and Chevy makers were a welcome signal that it's not all about chips and data centers. 

The glaring exception to that trend is a sector that was also familiar to our ancestors—transports, which includes railroad, airline, trucking, shipping, and logistics firms. This sector hasn't kept pace with the overall market this year, and some parts of the transport economy have been particularly soft. This is concerning, or at least would be in past decades, because transport health often correlates with economic health. 

With exceptions here and there, until this year the Dow Jones Transportation Average™ ($DJT), a 20-stock index that represents well-known U.S. companies within the transportation sector, spent the last two decades climbing along with the broader market and at times even pulling ahead of the S&P 500 index^® (SPX) on a percentage basis. After both indexes bottomed in March 2009 during the Great Recession, the $DJT climbed about 500% to its peak in November 2024, while the S&P 500 climbed about 750% over the same period. Larger gains for the broader index reflect the strength of technology firms, which aren't represented in the $DJT and doubled the pace of the S&P 500's growth over that 15-year stretch. 

As shown in the chart below, transports have recently stumbled. As of mid-November, the $DJT (red and green candlesticks) was down 7.3% over the last year. The SPX (blue line) was up almost 13% over the same period, and the S&P 500 Equal Weight Index, or SPXEW, (purple line) gained roughly 2.7%. It's just one year, and things could turn around, of course, but historically a divergence like this has been viewed as a warning sign of a potential economic slowdown or an impending market correction. 

One reason transports are stalling is U.S. tariffs, which raised import costs and slowed shipments from abroad. This hurt the entire sector. Beyond tariffs, transports have been hit by a slowdown in demand for large goods like furniture and appliances following the pandemic-era surge, higher costs due to rising wages and insurance, and a soft U.S. manufacturing climate. 

But in some areas, transports are running into competition from the newer elements of the U.S. economy, including the so-called Magnificent Seven. For instance, shares of UPS bounced in late October as the company reported traction in its cost-cutting measures, but revenue still dropped 3.7% from the same quarter a year ago. This followed several years of relatively flat revenue. Delivery firms face new competition as Amazon (AMZN) and other e-commerce companies' delivery networks continue to mature. 

Those same giants are also making it harder for UPS and rival FedEx (FDX) to plan for ebbs and flows in demand, The Wall Street Journal recently reported. Amazon's Prime Day events or a skin care product going viral on TikTok, according to the newspaper, can cause sudden demand surges that challenge delivery companies' capacity. 

Amazon has transformed the logistics landscape, capturing significant market share from traditional carriers, such as UPS and FedEx, particularly in "last mile" delivery—the final step of transporting goods to consumers' doorsteps. Through its vast fulfillment network, Amazon has optimized logistics and reduced costs by leveraging regional warehouses and distribution hubs to keep popular products close to major consumer markets. 

"Amazon's emphasis on delivery transparency, precise time management, and price comparison options across multiple third-party sellers has enhanced the customer experience," Green said. "This marketplace model has also enabled smaller sellers to gain traction through Amazon's logistics infrastructure, effectively bypassing legacy delivery providers." 

By contrast, UPS and FedEx have faced mounting labor cost pressures over the past several years—UPS's 2023 Teamsters contract, for instance, will raise average full-time driver pay to roughly $170,000 including benefits by 2028, pressuring margins. Amazon, which primarily uses contractors and gig-style delivery drivers through its Amazon Flex and Delivery Service Partner (DSP) programs, remains more insulated from union-related cost inflation. 

While overall package volumes have softened—reflecting weaker discretionary spending and the post-pandemic normalization of e-commerce—Amazon's AWS (Amazon Web Services) cloud division continues to drive profitability and offset cyclical downturns in its retail operations. 

Over at the truck stop, JB Hunt has faced volume declines and lower container utilization since the pandemic, as freight patterns have shifted and inventories have normalized. When containers aren't filled to capacity, per-unit shipping costs rise, compressing margins. At the same time, the proliferation of private and third-party logistics carriers has increased supply and intensified price competition across the industry. 

"This decentralization has eroded JB Hunt's historical advantage in integrated freight services," Green said. "Trade tensions—especially between the United States and China—have further complicated global shipping flows, creating volatile and unpredictable demand patterns that make cost management difficult." 

Not all transport stocks are struggling. Uber (UBER) surged 48% year to date by late October, and the logistics firm Ryder (R) rose 17% over the same period. Norfolk Southern (NSC) climbed 22% as well, though that reflects enthusiasm about Union Pacific's (UNP) bid to buy the railroad in an $85 billion merger. Shares of UNP were down slightly this year by the end of October. 

Union Pacific, Norfolk Southern, and fellow railroad giant CSX (CSX) continued to serve as useful gauges of the industrial economy, though they are now less reflective of the modern, service-driven U.S. economy. 

Rail remains a highly concentrated industry with limited competition and ongoing merger activity. Geographic segmentation also plays a crucial role: Union Pacific and BNSF, owned by Berkshire Hathaway (BRK.B), dominate western routes, while Norfolk Southern and CSX control most eastern corridors. 

"Recent policy shifts may impact volumes" in the railway business, Green said. "The scaling back of green energy incentives, such as those tied to wind turbine production and transport, could reduce rail freight tied to renewable infrastructure. Meanwhile, grain exports have remained sluggish amid global oversupply and geopolitical uncertainty. On the positive side, renewed global demand for coal exports—particularly to Europe and Asia—has provided a modest tailwind for carriers like CSX and Norfolk Southern." 

Other transportation firms losing stock market steam include UPS, FedEx, American Airlines (AAL), and Kirby Corp. (KEX), a tank barge operator. Falling chemical prices and a tepid oil and gas market have hurt some shipping firms. 

None of this pushes transports permanently to the side of the road. A meaningful U.S. economic surge that lifts incomes across the spectrum might help the sector, and train and airline companies would likely benefit from another drop in crude oil prices, though that might hurt a company like Kirby. 

"Transport companies still provide valuable insight into goods movement, supply chain health, and consumption trends—though many are facing both internal challenges and macro-level headwinds, such as weaker global trade and reduced shipping volumes," Green said.