Transportation Stocks to Watch in 2025: Potential Major Decline and Price Analysis
Explore why transportation stocks have stalled in 2025 and what investors should expect amid looming resistance and sector challenges.
The Dow Jones Transportation Average (DJTA) has shown gains alongside the broader market since late 2023, yet it now faces critical resistance levels that may trigger a significant downturn. As earnings season unfolds, investors in leading transportation stocks and related funds should consider securing profits and employing risk management strategies such as stop losses and protective options.
Unlike the Dow Jones Industrial Average or the S&P 500, the DJTA has not reached new highs and remains well below its 2018 peaks. This bearish divergence aligns with the cyclical nature of the transportation sector amid an extended economic expansion. Furthermore, trading volumes have been subdued since mid-2023, indicating weak buying momentum necessary for sustained growth.
Compounding sector headwinds, major companies like FedEx Corporation (FDX) and United Parcel Service, Inc. (UPS) face stiff competition from Amazon.com, Inc. (AMZN), which has developed an advanced in-house delivery network. Since Amazon's initiative announcement, FedEx shares have dropped sharply and show no signs of recovery.
The iShares D.J. Transportation Average Index Fund (IYT) surged past its 2008 high near $100 in 2013, peaking in the $160s by late 2014. It declined through 2015 and early 2016, hitting a two-year low of $115. Post-2016 U.S. presidential election, the fund rallied to $207 in January 2018. However, trade tensions capped gains, leading to volatility and a steep drop at the end of 2018. A rebound in early 2019 stalled near $200, just shy of 2024's current price, signaling a precarious position below multi-year resistance.
Delta Air Lines, Inc. (DAL) started earnings season strong by exceeding Q4 expectations but lowered guidance for Q1. Despite a positive market response, DAL trades only slightly above its January 2015 highs and has struggled to sustain upward momentum. However, minimal resistance exists up to the mid-to-high $60 range, offering some potential upside.
Union Pacific Corporation (UNP), the largest transportation sector component by market cap, reports earnings next week. Railroads have outperformed other transportation segments recently, supported by robust shipping volumes and rising crude oil prices. UNP recently hit an all-time high of $182.83, joining top performers like Kansas City Southern (KSU). After breaking out in 2010 and reversing in 2015, UNP cleared resistance in late 2017 and reached new highs through April 2019. Despite forming a bullish cup and handle pattern, the on-balance volume (OBV) indicator remains below its 2018 peak, suggesting limited breakout potential.
The Bottom Line
The Dow Jones Transportation Average has lagged behind key market benchmarks and may be poised for an intermediate correction. Investors should remain cautious and consider risk management strategies during this volatile period.
Disclosure: The author held no positions in the securities mentioned at the time of publication.
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