S&P 500 rally masks warnings from transport front

While the broader US equity market shows signs of recovery, a warning light for investors continues to flash — the Dow Jones Transportation Average is signaling growing concern about the health of the economy.

Breather after slide

Last week, the S&P 500 posted a modest gain, snapping a four-week losing streak. That offered investors a sliver of cautious optimism: the benchmark index began to claw back losses after entering correction territory, having fallen more than 10% from its February high.

Transport sector stalls

The picture looks markedly different in the transport sector. The Dow Jones Transportation Average has extended its decline, deepening the downtrend that began in November. Losses now exceed 17% from the peak. The index — which includes airlines, trucking companies, railroads, and logistics giants — has come under particularly heavy pressure.

Macro-level warning signs

The slump in transportation points to deeper economic anxieties. One driver is growing uncertainty around US tariff policy. Investors remain unsure how trade decisions under Donald Trump's administration will affect future growth.

Additional pressure came from the Federal Reserve, which lowered its US growth forecast for 2025 from 2.1% to 1.7%. Fed Chairman Jerome Powell called the current level of uncertainty "unusually high."

Blows to key players

Since the start of 2025, the Dow Jones Transportation Average has fallen about 8% — twice the drop seen in the S&P 500 over the same period. The decline has been broad-based: FedEx shares are down 18%, and UPS has dropped nearly 9%. FedEx took a particularly hard hit on Friday after it cut its full-year financial outlook.

Transport weakness clouds market optimism

Although the overall market is showing signs of stabilization, weakness in the transportation sector serves as a reminder: the recovery may not be as robust as it appears. And as trucks, trains, and planes stall, investors are watching macro signals closely, trying to discern the true direction of the US economy.

Carrier and airline stocks plunge

The transportation sector continues to suffer losses. Shares of ground freight operators Landstar and JB Hunt Transport Services have plunged more than 12%. However, the hardest blow has landed on airlines — especially amid a recent wave of downward earnings revisions. Since the start of 2025, Delta Air Lines and United Airlines have shed over 20%, while American Airlines has dropped nearly a third, down 35% year-to-date.

Barometer of consumer activity

The downturn in the transport sector is more than just a snapshot of corporate pain — it is a vital gauge of economic sentiment. As Matt Maley, chief market strategist at Miller Tabak, points out, the Dow Jones Transportation Average reflects the movement of goods across the country, which is directly linked to consumer spending levels.

According to Maley, the index's decline confirms the weakness seen in the macro data and reinforces the more pessimistic tone on Wall Street.

Dow Theory: troubling index duo

Some investors do not view the transport index in isolation — they assess it alongside the Dow Jones Industrial Average, in line with classic Dow Theory. That principle holds that the market is truly strong only when both indices advance in tandem. But the current picture tells a different story.

The Industrial Dow is down 1% year-to-date and has fallen roughly 7% from its December highs. Paired with the sharp drop in the transport index, this presents a worrying signal: a clear sign that the economic recovery is stalling.

Russell 2000 slips: small business worries

It is not just Dow Transports showing weakness. The Russell 2000, which tracks small-cap US companies — typically the most sensitive to domestic economic shifts — is also in the red. Since November, it has lost over 15% from its one-year peak.

This signal carries weight: small businesses are often the first to feel the chill of a slowdown. When they are hurting, it is a sure sign that the economic engine is losing steam.

Semiconductor slump: chips under pressure

Fresh warning signs are flashing from the tech sector. The Philadelphia SE Semiconductor Index is down more than 22% from its July high. That is especially notable given that chips power everything from smartphones to cars — and the semiconductor industry is widely viewed as a leading indicator of the broader economy's health.

Awaiting fresh data: pivotal week for market analysts

The coming days promise to be eventful for market participants. Several key reports are set to shed light on the current state of the US economy. Among them are updated consumer sentiment and confidence indices, which will reveal how resilient American optimism remains amid market turbulence.

Particular attention will center on March 28, when a crucial inflation indicator — the Personal Consumption Expenditures (PCE) Index — is released. Its publication could significantly sway interest rate expectations and the future path of the Fed's monetary policy.

Tariff jitters: countdown begins

Investors remain closely attuned to developments in US trade policy. The Trump administration has announced a new round of retaliatory tariffs, potentially set to take effect as early as April 2. The measures are being framed as an effort to level the playing field in global trade.

But until that deadline, markets may experience heightened volatility. Shares of companies tied to global supply chains are particularly sensitive. According to Rick Meckler, partner at investment firm Cherry Lane Investments, transport sector stocks are likely to remain the most volatile during this period of uncertainty.

Europe rises: copper and stimulus drive gains

While US markets wrestle with mixed signals, European equities are posting cautious gains. On Monday, the pan-European STOXX 600 index rose 0.6% by mid-morning GMT, driven by strength in mining stocks — the SXPP sub-index climbed 2.6% following a jump in copper prices.

Investors bet on commodities

Investor interest in mining companies also found support in research: JPMorgan upgraded its sector rating — from underweight to overweight. The move signals a growing view that commodity producers may offer a safe haven amid a shaky global economy.

Germany's fiscal push sparks market optimism

Adding fuel to the rally, Berlin approved plans for a massive increase in public borrowing, aimed at bolstering growth in Europe's largest economy. The move reinforced confidence that the eurozone is ready to take bold action against the risk of an economic slowdown.

Trade tensions mount: investors poised for action

Financial markets are holding their breath as they await clarity from the White House. Donald Trump has pledged to introduce a new round of retaliatory tariffs on April 2, and Wall Street is watching the developments with growing unease. Investors are trying to gauge how these measures might disrupt global supply chains and how deeply they could dent corporate profits.

Market awaits PMI data

As trade headlines dominate the narrative, a key batch of macroeconomic data looms large. On Monday, preliminary Purchasing Managers' Index (PMI) readings will be released for France, Germany, and the eurozone as a whole. These figures will offer a glimpse into how resilient European businesses remain amid rising external risks.

PMIs are traditionally seen as a barometer of economic health, especially in the manufacturing sector, which is particularly sensitive to fluctuations in global demand.

Bayer hit hard: jury delivers stinging verdict

Meanwhile, one of Europe's largest industrial giants — Bayer — has been thrust into the spotlight amid a legal firestorm. The company's shares tumbled 6.6% after a US jury ordered it to pay a staggering $2.1 billion in a lawsuit over its popular Roundup herbicide.

The plaintiff claimed that the use of the product caused the development of cancer. The ruling marks yet another chapter in a string of high-profile legal battles Bayer has faced since acquiring Monsanto, the maker of the controversial herbicide.