U.S. railroad stocks slid Thursday as broader market fell on economic concerns, report showing U.S. rail traffic declined last week
August 19, 2011
– Railroad stocks slid Thursday as the broader market tumbled on concerns about the fragility of the economy and a report that said traffic on U.S. rails fell last week.
For the week ending Aug. 6, the Association of American Railroads said carloads moved by U.S. railroads fell 1.2 percent from the same week last year. Railroads carry a myriad of goods from lumber to car parts and retail goods. Eleven of the 20 carload categories showed gains from the same week a year ago, including metallic ores, iron steel and scrap, and petroleum products. But commodities like grain and nonmetallic minerals fell by double-digits.
So far this year, traffic on U.S. railroads is up 2.1 percent from the same point last year, highlighting the economy's slow growth.
Railroads tend to be an indicator of broader economic health because they carry so many things that consumers use every day. So it's understandable that when concerns about the economy swoon, worries about the health of railroads rise too.
The Dow Jones industrial average at one point in trading Thursday was down more than 500 points. All major market indexes fell more than 4 percent.
The sell-off was driven by the growing fear that consumers are getting pinched at the grocery store and the gasoline pump. Fears about continued high unemployment are spooking the market as well.
The Labor Department said Thursday the number of people applying for unemployment benefits rose back above 400,000 last week. Still, the four-week average, a more reliable gauge of the job market, fell to the lowest level since mid-April. The report suggests that the economy is creating jobs but not nearly enough to lower the high unemployment rate.
The department also said Thursday that consumers paid more for essentials including gas, food and clothes last month, pushing prices up by the most since the spring. An increase in gas prices accounted for much of the swing.
In afternoon trading, Union Pacific Corp., the nation's largest railroad, fell $6.27, or 6.8 percent, to $85.66. Eastern rail CSX Corp. lost $1.43, or 6.3 percent, to $21.13. Rival Norfolk Southern Corp. gave up $3.64, or 5.3 percent, to $64.66.
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