Transportation Stocks Slide Amid Economic Concerns and Tariff Worries
On Friday, transportation stocks experienced a sharp decline, with the Dow Jones Transport average index plummeting over 2.6%. This represents the index's steepest daily loss since December 18 and marks its third consecutive day of declines.
The downfall was fueled by weak economic data and growing concerns surrounding tariffs. S&P Global data revealed that U.S. business activity nearly halted in February, reaching a 17-month low. Fears over import tariffs and significant federal government spending cuts overshadowed positive sentiment following the November presidential election.
The University of Michigan's survey also showed a drop in U.S. consumer sentiment in February. This was accompanied by escalating inflation expectations as households expressed unease over plans for extensive tariffs.
Walmart's downbeat forecast on Thursday added further fuel to market concerns. The retailer cited uncertainty in the geopolitical landscape as it lowered its outlook.
Robert Pavlik, senior portfolio manager at Dakota Wealth, attributed the transportation sector's decline to questions about economic health and apprehensions over tariffs. President Trump has imposed a 10% tariff on Chinese imports and raised tariffs on steel and aluminum imports to 25%. He has also threatened to impose tariffs on automobiles, semiconductors, and pharmaceutical imports.
Experts fear that these tariffs could escalate prices and reduce demand for goods, impacting freight companies and home package delivery services. Art Hogan, chief market strategist at B Riley Wealth, suggests that if tariffs are implemented, international deliveries may decrease while domestic deliveries could increase.
The broader market also exhibited risk aversion on Friday, with all three major Wall Street indexes losing over 1%. The Nasdaq suffered the most significant decline, dropping 2.2%.