Five Transportation-Sector Stocks on the Move
The transportation sector has seen a nice rally since March of this year, but the question at hand is whether or not it can be sustained.
The sector has some things going for it: The Obama administration’s emphasis on rebuilding the nation’s infrastructure will help increase efficiency in the industry through improved highways, roadways, and other transportation gateways. Additionally, as the red tape unfolds on the stimulus package, it will ignite a spark in the industry by indirectly increasing the demand for transportation. Lastly, crude oil has dipped and tumbled from its recent rally, making the bottom line for transportation companies more appealing.
Unfortunately, it isn’t all sunshine for the sector, and several obstacles must be overcome -- the biggest being the weak economy. Jobless rates seem to be unable to stabilize and consumer confidence continues to remain weak.
In June, the unemployment rate hit a 26-year high, and consumer confidence took an unexpected dump, falling far below expectations. Another difficulty that the sector will potentially face is a rise in crude-oil prices. As the economy continues to struggle, the US dollar remains weak, and inflationary fears hover over Wall Street, commodities -- a traditional hedge against inflation and a weak dollar -- will become attractive and prices will increase.
Some companies and ETFs to watch are the following:
1. Con-Way Inc. (CNW) rebounding nicely from a March low of $13.20 to close at $34.56 on July 6; a jump of 162%.
2. United Parcel Service (UPS), up 28% after witnessing a March low of $38.30 to close at 49.14 on July 6.
3. FedEx Corporation (FDX), gaining 63% since hitting a $34.28 low in March to close at $56.04 on July 6
4. Union Pacific Corp (UNP) closing at $50.72 on July 6 after seeing a low of $33.62 in March, an increase of 51%.
5. iShares Dow Jones Transportation Average (IYT) up 47% from a March low of $38.62 to close at $56.69.
When considering these energy equities, keep in mind that they come with risks. To help moderate this, a sound exit strategy is of utmost importance. According to the latest data from www.SmartStops.net, here are the price levels where the uptrend of these stocks would be over: CNW at $30.69; UPS at $46.78; FDX at $51.94; IYT at $53.82. Keep in mind that these levels change daily.
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Essentially no actual infrastructure building is being funded at present. Caterpillar is still laying off workers, whereas its CEO said that if a "responsible stimulus bill were passed, we would be rehiring." Only a pittance of "infrastructure investment" is scheduled to be funded in 2010. The vast majority of the porkulus bill goes to fund things like Acorn, St. Hope Academy, and new jobs that 1) search for ways to get more "stimulus" money, 2) publicize (read "market") new grants of stimulus money.
