April 27, 2018 12:45 PM, EDT

Transportation Stocks Struggle Despite a Broader Market Rally

Getty Images

Industrial stocks were poised for a rally April 27 after solid earnings reports from UPS Inc. and Raytheon Co., and a reversal of the defense and aerospace selloff that puzzled investors earlier this week. But transports are having none of that.

UPS ranks No. 1 on the Transport Topics Top 100 list of the largest North American for-hire carriers.

Airlines, rails and trucking stocks sold off sharply April 26 after disappointing outlooks from American Airlines Group Inc., Southwest Airlines Co. and Union Pacific Corp., and a warning from Knight-Swift Transportation Holdings Inc. that “perhaps the most difficult” driver-sourcing challenge that it has seen will persist.

Knight-Swift shares are down 6.8%, “much too much,” Deutsche Bank analyst Amit Mehrotra wrote in a note to clients, adding that it is “a bit of an odd market, where results need to be ‘blowouts’ to sustain and increase equity value.” Mehrotra said the April 26 declines also likely reflect the volatility inherent in truckload stocks, “resulting from the constant churn in the truckload share capital base.”

A standard gauge for the broader group, S&P 500 Industrials Sector Index, dropped as much as 1.2% on April 26 but recovered later and was little changed in the late afternoon. The transports average, however, still was down 0.4%, with American Air, Union Pacific and United Continental Holdings leading the decline. Meanwhile, the S&P 500 Index jumped as much as 1.4% on April 26.