TRANSPORTATION stocks were among the standouts in another flat session for US equities yesterday, and the sector’s rally could be cause for optimism ahead.
However, the Nasdaq rose for its seventh straight day, extending its rally to 6.8 per cent.
The Dow Jones Transportation Average rose 1.2 per cent and hit a new closing high at 5,566.07. The gains were led by Con-Way Inc, which added 5.7 per cent to $41.87 after the US trucking company said it was restoring some employee benefits because the economy had improved.
Transports are considered a barometer for economic activity because shipping activity signals demand for goods. FedEx Corp advanced 1.3 per cent to $96.78 while Union Pacific Corp hit an all-time high, rising 0.8 per cent to $106.59.
“Strength in transportation stocks goes a long way to signaling that manufacturing will continue to be robust and that the cyclical nature of the recovery is picking up steam,” said Roger Volz, director of cash equities at BGC Financial in New York.
Volz added that if the sector maintained its highs, “that would suggest we’re working out of this current soft patch and into a new leg of economic growth.”
The S&P 500 has been fluctuating in a range from about 1,250 to 1,350 for the last several months, with flare-ups in the Eurozone debt crisis often serving as a catalyst for profit-taking in a short-term trader’s market.
The Dow Jones industrial average was up 56.15 points, or 0.45 per cent, at 12,626.02. The Standard & Poor’s 500 Index was up 1.34 points, or 0.10 per cent, at 1,339.22. The Nasdaq Composite Index was up 8.25 points, or 0.29 per cent, at 2,834.02.
Moody’s downgrade of Portugal’s credit rating on Tuesday to “junk” cast new doubt on European efforts to rescue distressed Eurozone states without debt restructuring.
Reflecting concerns about the euro-zone debt crisis, the iShares MSCI Italy index fell 3.3 per cent and the iShares MSCI Spain index lost 2.2 per cent.
Banks were among the worst performers on concerns about their exposure to Eurozone debt and sluggish US growth. The KBW Bank Index fell 0.7 per cent, with Bank of America Corp, the Dow’s biggest loser, down 2.4 per cent at $10.74. Gains were also limited by a softer-than-expected survey on US services sector growth, which slowed slightly in June. The data gave investors little reason to make big bets after last week’s rally drove the S&P 500 up 5.6 per cent.