Weakening demand and falling prices could hurt transportation stocks as recession fears grow, according to Bank of America. BofA downgraded nine transport stocks and cut their price targets — including lowering their ratings on UPS and Union Pacific to neutral from buy. "Freight market signals have turned increasingly softer and suggest demand is waning (and not due to capacity being added)," Bank of America's Ken Hoexter said in a note Friday. "Pricing is declining rapidly, capacity is available, and these shifts could signal a downturn in the economy and lower demand," Hoexter added. The call comes as worries grow of an imminent recession, as the Federal Reserve hikes interest rates to tamp down on inflation. "Recession fears have increased on rising inflation, fuel prices, interest rates (inverted yield curve), and lower subsidies, and has begun to be reflect in Transport stocks," Hoexter said. The Dow Jones Transportation Average is down 11.4% this year, versus the Dow Jones Industrial Average's 4.8% decline. The Dow Transports is also down 5.9% this week, on pace for its worst weekly performance since January 2021. —CNBC's Michael Bloom contributed reporting.
The United Parcel Service Inc. (UPS) logo is displayed on a truck parked in New York.
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Weakening demand and falling prices could hurt transportation stocks as recession fears grow, according to Bank of America.