Transportation Stocks Rise, Halting Worst Slide Since August
The Dow Jones Transportation Average rose, rebounding from the biggest five-day decline in more than a month, as airlines rallied and traders bought the cheapest shares since 2009.
Delta Air Lines Inc. (DAL) and United Continental Holdings Inc. (UAL) surged at least 6.3 percent to lead gains as the average rallied 1.7 percent at 4 p.m. New York time. Con-way Inc. (CNW), a freight hauler, advanced 3.5 percent while railroad operator CSX Corp. (CSX) climbed 3.4 percent. The group did better than the Standard & Poor’s 500 Index, which added 0.6 percent.
The benchmark gauge for transportation companies had slipped 11 percent in five days through yesterday, driving its price-earnings ratio down to a 26-month low of 18.7. The period marked the worst slump since early August when Standard & Poor’s stripped the U.S. of its AAA rating and policy makers struggled to reach a compromise on raising the nation’s debt ceiling, sending the S&P 500 to its 2011 low.
While the gains in trucking, airline and courier shares exceeded the S&P 500, the transportation index is still down 9.6 percent since Sept. 15, spurred by concern the U.S. is poised for a recession and the European debt crisis will grow. Transportation stocks, which are considered barometers for the economy, entered a bear market last month, losing more than 20 percent since the 2011 high.
“When you look at where it is, despite today’s move, the broader trend is still somewhat weak,” Kevin Caron, a market strategist in Florham Park, New Jersey, at Stifel Nicolaus & Co., said in a telephone interview. His firm has more than $115 billion in client assets. “The economy is off and slow and there’s been a haircut to equity values because of that.”
Equity declines have brought the S&P 500’s valuation down to 12.4 times reported earnings, near the lowest point since March 2009. The valuation for the transportation index has fallen from 25.4 times earnings in July.
To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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