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Dec. 4, 2018, 4:17 p.m. EST

Dow transports suffer biggest-ever point drop, led FedEx and UPS stock selloffs

Skepticism and confusion over trade deal, flattening yield curve fuel growing concerns over economic slowdown

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By Tomi Kilgore, MarketWatch


Bloomberg News

The Dow Jones Transportation Average tumbled to its biggest-ever point drop, fueled by growing fears of an economic slowdown.

The Dow transports /zigman2/quotes/210598063/realtime DJT +0.57% tumbled 476.37 points, or 4.4%, with all 20 components closing lower. The previous biggest-ever point decline was 445.16 points on Oct. 10. At its intraday worst, the index was down as much as 565.23 points, or 5.2%.

Factors contributing to the selloff include increasing doubts over the significance of the U.S.-China trade war truce agreement, amid confusion and skepticism over exactly what the agreement entails.

Don’t miss : Trump Today: President acknowledges China talks could fail and threatens tariff increases in latest salvo.

Also read : Trump says he’s ‘Tariff Man,’ and Twitter decides it’s a superhero name.

In addition, a rapidly flattening Treasury yield curve fueled fears that recession was on the horizon, as an inverted yield curve — when yields on longer-dated Treasurys fall below yields of shorter-term Treasurys — has preceded previous recessions. Some parts of the curve are already inverted, as the 5-year yield is below the three-year yield. See Bond Report.

Many on Wall Street view the DJTA as a key economic indicator, because the index helps gauge how consumers and businesses are actually taking what companies are making.

/zigman2/quotes/210598063/realtime DJT 12,301.61, +69.51, +0.57%

Meanwhile, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.51% dropped 799.36 points, or 3.1%, while the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.05% shed 3.2% and the Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -0.19% lost 3.8%. See Market Snapshot.

Within the DJTA, the biggest drags were the shares of UPS /zigman2/quotes/201245396/composite UPS +0.44% sank 7.4%, the biggest decline since January 2015, and FedEx /zigman2/quotes/203047719/composite FDX +2.66% tumbled 6.3% to suffer the deepest decline since March 2013. The stocks’ combined price declines shaved 140 points off the DJTA’s price.

Morgan Stanley analyst Ravi Shanker cut his price target on UPS to $87 from $92 and on FedEx to $230 from $240, saying he believes the market is missing the risk Amazon Air poses” to the companies. He kept his underweight rating on UPS and his equal weight rating on FedEx.

Although the rollout of Amazon.com Inc.’s /zigman2/quotes/210331248/composite AMZN -0.66% Amazon Air is still in the early innings, Shanker estimates a 2-to-3 percentage points impact on UPS and FedEx domestic air volume growth already, with more erosion expected as Amazon Air is built out.

/zigman2/quotes/201245396/composite UPS 164.48, +0.71, +0.44%
/zigman2/quotes/203047719/composite FDX 284.05, +7.36, +2.66%

Separately, UBS analyst Thomas Wadewitz downgraded a number of trucking companies, citing concerns that earnings for the current quarter may not be good enough to boost the stocks after the “peak season tightening” in the freight market was more muted than expected.

Wadewitz cut his ratings on Werner Enterprises Inc. /zigman2/quotes/203487134/composite WERN -3.73% , Knight-Swift Transportation Holdings Inc. /zigman2/quotes/206974312/composite KNX -3.84% and Hub Group Inc. /zigman2/quotes/203754808/composite HUBG -0.78% to neutral from buy, while slashing his price target on Werner’s stock by 14% to $36, on Knight-Swift by 16% to $36 and on Hub by 24% to $48. He also lowered his targets on Schneider National Inc. /zigman2/quotes/203301381/composite SNDR -2.85% by 16% to $26 and on J.B. Hunt Transport Services Inc. /zigman2/quotes/205536609/composite JBHT -1.20% by 14% to $124.

“We believe that the combination of incremental expansion capacity and increasing risks to freight demand point to a softer truckload pricing environment in 2019 which could result in either low single digit pricing gains or a modest decline in rates in the 2019 bid season,” Wadewitz wrote in a note to clients.

J.B. Hunt’s stock, a DJTA component, fell 4.2%, Werner’s shares shed 4.4% and Hub’s stock plunged 10%.

Airlines shares also dropped, with American Airlines Group Inc. /zigman2/quotes/209207041/composite AAL +4.35% shedding 7.5%, Delta Air Lines Inc. /zigman2/quotes/200327741/composite DAL +3.03% dropping 5.3%, United Continental Holdings Inc. /zigman2/quotes/205037281/composite UAL +2.78% losing 4.5% and Southwest Airlines Co. /zigman2/quotes/201071949/composite LUV +0.66% falling 2.6%.

/zigman2/quotes/210598063/realtime
US : Dow Jones Indices
12,301.61
+69.51 +0.57%
Volume: 87.69M
Nov. 23, 2020 12:15p
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/zigman2/quotes/210598065/realtime
US : Dow Jones Global
29,412.09
+148.61 +0.51%
Volume: 160.65M
Nov. 23, 2020 12:15p
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,559.17
+1.63 +0.05%
Volume: 1.03B
Nov. 23, 2020 12:15p
loading...
/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
11,832.36
-22.61 -0.19%
Volume: 2.67M
Nov. 23, 2020 12:15p
loading...
/zigman2/quotes/201245396/composite
US : U.S.: NYSE
$ 164.48
+0.71 +0.44%
Volume: 1.22M
Nov. 23, 2020 12:15p
P/E Ratio
31.21
Dividend Yield
2.46%
Market Cap
$141.55 billion
Rev. per Employee
$149,327
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/zigman2/quotes/203047719/composite
US : U.S.: NYSE
$ 284.05
+7.36 +2.66%
Volume: 1.25M
Nov. 23, 2020 12:15p
P/E Ratio
18.73
Dividend Yield
0.91%
Market Cap
$72.66 billion
Rev. per Employee
$304,846
loading...
/zigman2/quotes/210331248/composite
US : U.S.: Nasdaq
$ 3,078.83
-20.57 -0.66%
Volume: 2.56M
Nov. 23, 2020 12:15p
P/E Ratio
90.16
Dividend Yield
N/A
Market Cap
$1555.13 billion
Rev. per Employee
$351,531
loading...
/zigman2/quotes/203487134/composite
US : U.S.: Nasdaq
$ 39.47
-1.53 -3.73%
Volume: 580,397
Nov. 23, 2020 12:15p
P/E Ratio
17.55
Dividend Yield
0.91%
Market Cap
$2.83 billion
Rev. per Employee
$185,576
loading...
/zigman2/quotes/206974312/composite
US : U.S.: NYSE
$ 40.42
-1.61 -3.84%
Volume: 1.39M
Nov. 23, 2020 12:15p
P/E Ratio
20.72
Dividend Yield
0.79%
Market Cap
$7.14 billion
Rev. per Employee
$205,252
loading...
/zigman2/quotes/203754808/composite
US : U.S.: Nasdaq
$ 54.47
-0.43 -0.78%
Volume: 42,253
Nov. 23, 2020 12:14p
P/E Ratio
23.13
Dividend Yield
N/A
Market Cap
$1.88 billion
Rev. per Employee
$733,623
loading...
/zigman2/quotes/203301381/composite
US : U.S.: NYSE
$ 21.15
-0.62 -2.85%
Volume: 174,515
Nov. 23, 2020 12:13p
P/E Ratio
19.72
Dividend Yield
1.23%
Market Cap
$3.86 billion
Rev. per Employee
$303,323
loading...
/zigman2/quotes/205536609/composite
US : U.S.: Nasdaq
$ 132.23
-1.61 -1.20%
Volume: 166,847
Nov. 23, 2020 12:15p
P/E Ratio
28.58
Dividend Yield
0.81%
Market Cap
$14.14 billion
Rev. per Employee
$315,434
loading...
/zigman2/quotes/209207041/composite
US : U.S.: Nasdaq
$ 13.08
+0.54 +4.35%
Volume: 50.05M
Nov. 23, 2020 12:15p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$6.86 billion
Rev. per Employee
$345,547
loading...
/zigman2/quotes/200327741/composite
US : U.S.: NYSE
$ 38.26
+1.13 +3.03%
Volume: 7.42M
Nov. 23, 2020 12:15p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$23.68 billion
Rev. per Employee
$516,549
loading...
/zigman2/quotes/205037281/composite
US : U.S.: Nasdaq
$ 41.01
+1.11 +2.78%
Volume: 11.77M
Nov. 23, 2020 12:15p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$11.61 billion
Rev. per Employee
$450,615
loading...
/zigman2/quotes/201071949/composite
US : U.S.: NYSE
$ 45.84
+0.30 +0.66%
Volume: 4.72M
Nov. 23, 2020 12:15p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$26.88 billion
Rev. per Employee
$368,882
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Tomi Kilgore is MarketWatch's deputy investing and corporate news editor and is based in New York. You can follow him on Twitter @TomiKilgore.

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