Transportation stocks have hit the skids and are looking worse than the broader market, a trend that needs to reverse for stocks to stabilize.
“I think they have a longer-range problem,” said Art Cashin, director of floor operations at UBS. He said the group’s troubles began with the announcement of tariffs. “It pulled forward a lot of business. People were importing a lot of stuff. They ordered a lot of stuff, and I think we’re now seeing a slowdown in terms of activity.”
Sohn said some of the group’s better performers are now rolling over, like the railroads.
“There’s a lot of names that have heavy technical damage. Some of them could rally over the next few weeks, like a FedEx, but I think the broader damage has been done. It’s going to take some time to repair,” Sohn said. “These were stocks that went up sharply since February 2016, and now they’re in a sharp correction, even a bear market for some of them, and it takes time to work through.”
Sohn said he’s also watching industrials, including defense stocks. He’s particularly watching Boeing, down about 6 percent this month.
“You have to see improvement from them. It’s tough to get constructive without them working,” Sohn said.
Sohn and other technical analysts are watching the 2,600 level on the S&P as a lower level of support. If it breaks that level, the S&P’s next stop could be 2,350.