This afternoon the highly followed and traded Dow Jones Transportation Index is declining sharply as oil climbs near the $100.00 level. The iShares Dow Jones Transport ETF (NYSE:IYT) is trading lower by $2.50 to $89.72 a share. This is nearly a 3.00 percent decline for this broad index. The index is now trading below it’s daily 20 and 50 moving averages which puts the index in a weak technical position.
Leading transport stocks such as FedEx Corp. (NYSE:FDX), and CSX Corp. (NYSE:CSX) are trading lower as higher oil prices will effect the future economic outlook and the bottom line for corporate earnings. FedEx stock has declined lower by 10.00 points in just six trading days. CSX is a leading railroad stock that is declining lower by nearly 3.00 percent today. CSX stock is testing it’s daily chart 20 moving average for the second time in three trading sessions which could indicate a short term break of it’s recent up-trend.
High energy prices are a negative for most of the leading transport stocks. The airline, trucking, railroads, and shipping sectors all suffer when energy prices increase. Traders and investors should remember it was high oil that broke the markets in July 2008 when crude traded as high as $147.00 a barrel. Can this economy handle oil over $100.00 a barrel? U.S. Treasury Secretary Timothy Geithner said that the economy is much stronger now and can handle high energy prices. I would not bet on that.