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Dow transports index down over 17% from November high

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Struggles as investors worry about growth slowdown

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Reports next week on consumer sentiment, inflation

By Lewis Krauskopf

NEW YORK, March 21 (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 ( FDX ) and United Parcel

Service ( UPS ) 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 ( DAL ) and United Airlines Holdings ( UAL ) have tumbled

over 20% in 2025, while American Airlines ( AAL ) 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."