Trader Talk

Dow Transports Drop—What it Means

Bob Pisani is off; this post was written by CNBC producer Robert Hum.

It’s not all about Greece and Europe — global slowdown worries are also clouding the situation for stocks.

The Dow Industrials and S&P 500 are only down fractionally this morning…but look at what’s going on with the Dow Transports.

The Dow Transports is down 2.5 percent today, and now down 5.6 percent on the week — far underperforming the broader markets’ 1 percent declines.

Expectations for slower global economic growth are clearly weighing on railroads, airlines, and truckers.

This morning, coal producer Alpha Natural Resources cut its 2011 shipment guidance to 102.5 million tons-109.5 million tons, citing reduced demand from Asia and lower-than-expected production volumes from some of its coal mines.

That news is pulling down shares of other coal stocks Patriot Coal , Peabody Energy (BTU), Arch Coal (ACI), Consol Energy (CNX) and mining equipment stocks like Joy Global .

But that also doesn’t bode well for railroads like Norfolk Southern , CSX (CSX), Union Pacific (UNP), and Canadian National (CNI) which transport a lot of commodities, including coal, from one location to another. Those railroad stocks, as well as shares of railroad equipment makers including GATX and Trinity Industries (TRN) are all down 3-7 percent.

Coal’s impact on railroads is significant, too. Take CSX for example. Last year, coal shipments made up 25 percent of CSX’s volumes and nearly one-third of its revenues. No wonder it’s down 7 percent today.

The not-so-encouraging news for railroads follows yesterday’s warning from the International Air Transport Association (IATA) for reduced airline industry profits in 2012 due to the expected slowdown in global economic growth.

Less than three full days into the week, here are some of the poor performances by transport stocks so far this week:

CSX down 11%

Norfolk Southern down 10%

Con-Way down 8%

JB Hunt down 8%

Kansas City Southern down 6%

Southwest Airlines down 6%

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