Rising Transportation Stocks Defy Dow to Diverge Most Since July

  • Kirby Corp. leads gainers after affirming profit outlook.
  • The Dow Transport Average was up as much as 2.2% earlier.

Encouraging data on industrial production and housing plus a raft of company-specific tidings, from insider purchases to profit forecasts, supported transportation stocks and kept them out of the hole the rest of the market fell into Tuesday.

The Dow Jones Transportation Average increased 0.5 percent at 3 p.m. in New York, diverging the most from the falling industrial average since July 2015. Kirby Corp. led the advance after affirming a profit forecast and Avis Budget Group Inc. followed Hertz Global Holdings Inc. higher after its chief executive bought shares.

Good news on the manufacturing economy such as today’s reports on industrial production and housing tends to benefit stocks in the transportation average more than those in the Dow Jones Industrial Average, according to Alan Gayle of RidgeWorth Investments. The 20-member transport gauge includes railroad operators, airlines, truckers and delivery companies and none of the banks or computer firms represented in its better-known counterpart.

If manufacturers are “producing a bunch of stuff, there’s a transportation element to it,” said Gayle, a senior strategist at Atlanta-based RidgeWorth, which has about $37 billion in assets. The Dow and transportation indexes are “supposed to move in lockstep, but over time the flavor of the Dow has changed,” he said.

Technology giant Apple Inc. was the last company to be added to the Dow industrial average, pushing out AT&T Inc. The change prior to that boosted the influence of financial-related companies, with Goldman Sachs Group Inc. and Visa Inc. among the three stocks added to the gauge.

Kirby Corp. climbed 4.2 percent to the highest level since November. The tank barge operator reaffirmed is second-quarter and full-year 2016 guidance, while Morningstar Inc. analyst Matthew Young said rising oil prices may help boost demand for oilfield services.

Avis increased 3.7 percent. The car rental company was lifted by Hertz Global Holding, its biggest publicly traded competitor, after Chief Executive Officer John Tague and two other top managers bought at least 40,000 Hertz shares each.

Today’s outperformance pushed the transportation group’s advance in 2016 to 1.3 percent, double the Dow’s gain. The transports have rallied 15 percent from a January low, while the Dow, which bottomed on Feb. 11, has climbed 11 percent.

Airlines advanced, with American Airlines Group Inc. and Delta Air Lines Inc. rising more than 1.4 percent. American President J. Scott Kirby said told investors at an industry conference today that earnings are ‘sustainable’ at current fuel prices and that underlying demand remains strong.

Home Depot Inc. led declines in the Dow average after the home-improvement retailer’s executives said same-store sales fell each month over the course of the first quarter. Caterpillar Inc., one of the five industrial companies, rose 0.7 percent for the best gain.

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