By Lewis Krauskopf
NEW YORK (Reuters) – Even as U.S. stocks seek to regain their footing, weakness in a closely followed index of transportation shares is a sign of growing investor worries about the economy.
The S&P 500 as of Thursday was on pace to post a weekly gain after four straight negative weeks. The benchmark index was clawing back after it marked a correction last week by ending down over 10% from its February record high.
The Dow Jones Transportation Average was little changed for the week, but the 20-stock index has been pummeled recently. The gauge of airlines, truckers, rail companies, package delivery giants and other transport firms has slumped over 17% from its November all-time closing peak.
“The transports are an important tell on future economic activity,” said Chuck Carlson, chief executive officer of Horizon Investment Services. “The fact that they have significantly underperformed … gives me pause.”
The Dow Transports is struggling as investors are concerned about an economic slowdown, driven in part by uncertainty over the fallout from U.S. President Donald Trump’s back-and-forth tariff policies. The Federal Reserve on Wednesday downgraded its U.S. economic growth forecast this year to 1.7% from 2.1%, with central bank Chair Jerome Powell pointing to “unusually elevated” uncertainty.
So far in 2025, the Dow Transports are down about 8%, doubling the drop for the S&P 500 index in that time.
Weakness within the index has been broad. This year, shares of package delivery companies FedEx and United Parcel Service are down 12% and 7%, respectively. Trucking stocks Landstar and JB Hunt Transport Services are both off over 13%.
Shares of airlines, some of which recently cut their earnings estimates, have been hit particularly hard. Delta Air Lines and United Airlines Holdings have tumbled over 20% in 2025, while American Airlines has dropped 35%.
With many companies in the index involved in shipping products around the country, the Dow transports index offers insight into consumer spending, said Matt Maley, chief market strategist at Miller Tabak.
“It’s still an important indicator for the strength of the economic growth because it’s an indicator of the level of strength of the consumer,” Maley said.
The index’s slide is “supporting a lot of the weaker data that we’ve been seeing and supporting the lowering of expectations of economic growth around Wall Street,” Maley said.
Some investors track the transports index in concert with the Dow Jones Industrial Average to determine the overall trend of the market, known as “Dow Theory.” The Dow industrials index is down 1% in 2025 and about 7% from its December record high.
Aside from the Dow Transports, other indexes that investors cite as signals for the broader market or economy have posted steep declines.
The Russell 2000, an index of smaller companies generally seen as particularly sensitive to the domestic economy’s strength, is down 15% from its 52-week high in November.
The Philadelphia SE Semiconductor index is down 22% from its July record peak. Semiconductors are key components in a broad array of products, so chipmakers are closely followed for insight into the economy.
“They are all telling you the same message: There is potentially weakness underneath the hood of the U.S. economy,” said Matthew Miskin, co-chief investment strategist at John Hancock Investment Management.
A number of reports in the coming week will give a fresh read into the economy, including releases on consumer sentiment and consumer confidence. A key gauge of inflation, the monthly personal consumption expenditures price index, is due on March 28.
Tariffs will remain in the spotlight for Wall Street, with the Trump administration planning reciprocal tariffs on April 2 to rebalance the global trading system.
Heading into that deadline, the transportation stocks could be particularly volatile, said Rick Meckler, partner at Cherry Lane Investments.
“They’re at the center of the concerns investors have over tariffs and the potential for a slowing economy.”
(Reporting by Lewis Krauskopf; Editing by Richard Chang)
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