Transport Drama Revs Up

While both Dow averages were in the red Wednesday, they have been moving apart lately. While the DJIA has made 21 new all-time closing highs since October, the Transports have had a rougher go. The Transports made an all-time high on May 9, hit a low for the year in August, and have spent the ensuing months nicking and fighting with the DJIA. Since mid-November, the Transports have been in a downward trend as the DJIA keeps breaking records.

What gives? The notion that the Transports would confirm the DJIA rally makes sense because a relatively strong economy that boosts these large industrial companies typically means they are making, selling and shipping more products. This could be a case of overheated expectations.

All the hoopla and relief about a so-called soft landing for the economy ignores the impact of the slowdown on these companies, however soft it may be. UPS has been cutting costs of late, announcing earlier this month another 650 job cuts atop its prior plans to slash its staff by 1,200. But FedEx and UPS aren't the only companies worried about a slowing economy. Somewhat lost in the shuffle lately have been several reports of poor growth and weak demand by trucking companies, and slowing rail shipments.

The trucking industry has reported weak demand recently, lamenting that the typical pre-holiday peak didn't appear this year. Just last week, trucking companies YRC Worldwide(YRCW Quote) and USA Truck(USAK Quote) reported dismal profit outlooks.