Cardboard box index is down
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Cardboard box index is down
KAI RYSSDAL: You’ve got your Dow Jones Industrial Average. Your Nasdaq and your S&P. And lord knows we give them their due on this program. But you might want to keep an eye on another stock index, too. The Dow Transports. Railroads and truckers. Airlines and shipping companies. Firms that move the stuff we buy and sell. The Dow Transportation Index dropped almost two percent today. UPS led the way down. Shares in the parcel company got clobbered after it announced weaker-than-expected earnings this morning. And the third quarter’s not looking so hot either. But Marketplace’s Jeff Tyler reports there’s more to the story.
JEFF TYLER: With airplanes flying all over the world and trains chugging parcels across the country — surprise, surprise — UPS says higher fuel prices hurt its bottom line. It may seem obvious, but Wall Street-types were unprepared.
JORDAN GOODMAN: The general consensus has been, “Oh, higher fuel prices don’t really effect UPS and FedEx because they just pass it all on in fuel surcharges.” Well, it’s clear that the fuel surcharges they were passing along are nothing close to what they’re having to pay.
That’s personal finance expert Jordan Goodman with moneyanswers.com.
GOODMAN: The entire transportation sector is always considered the canary in the coal mine.
UPS spokesman Norman Black isn’t crazy about the canary characterization.
NORMAN BLACK: That’s not really fair any more. We used to be a pretty good leading economic indicator. But over the last 10 years, as we’ve moved to e-commerce, consumers pulling from the Internet exactly what they want, in addition to just-in-time inventory, we just don’t have that insight anymore. We can tell you what’s happening now, but we can’t really tell you what’s coming.
Wall Street may have had higher expectations, but Black says business at UPS is very strong.
BLACK: We still expect the small package industry will grow faster than GDP.
And with the gross domestic product expected to grow by about 3 percent this year, Morningstar analyst Peter Smith says UPS isn’t looking too shabby.
PETER SMITH: So while the outlook might be a bit disappointing, it’s not necessarily time to sound the alarm and I think we might be seeing a little bit of a market over-reaction today.
As in, the biggest one-day dip in the stock’s history. Shares in UPS plunged by about 10 percent.
I’m Jeff Tyler for Marketplace.
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