Transportation stocks have hit a roadblock.
That weakness comes as a handful of blockbuster transportation companies prepare to report profits in the next few days, including railroad companies CSX and Union Pacific and airlines southwest and American. These stocks are often viewed as the litmus test of the country’s economic health.
Delano Saporu, founder of New Street Advisors, believes in the group’s long-term potential but is wary of short-term weaknesses.
“The economic comeback has been stable so far and I think we are still on the threshold and beginning of this trend. I think the only threat we’ve talked a little about is the different threats that lead to more a correct in the short term, “Saporu told CNBC.Trading nation” on Tuesday.
The proliferation of the Covid Delta variant has raised concerns on Wall Street that the pace of economic recovery may slow, particularly globally as countries struggle to contain the virus.
“But when we look at the profits and long-term activities of the transportation companies, I still believe that this is still an upward trend,” added Saporu.
Katie Stockton, founder of Fairlead Strategies, also sees this as a temporary step in the context of a broader recovery.
“This correction is just that – a correction, a pullback in the context of a long-term uptrend,” she said in the same interview.
That withdrawal also put some of the transportation stocks in an enviable position in terms of earnings, she said.
“The correction has resulted in oversold conditions for a variety of transportation stocks through a number of different actions,” she said. “Names like Southwest, American, CSX, Norfolk South“They all have these signs of short-term downward exhaustion and that positions them better when they go into earnings reports and are more likely to respond positively to perhaps even disappointing earnings.”
Airlines were hit hardest last month – United, Alaska and JetBlue all fell more than 11% over that period.