Transportation Index 12/01/14

[whodoyoulike]

Just noticed a close at 8,949 a drop of 249 (-2.71%). Is this unusual? What does this mean? I always read the transport index was a good general market indicator. I haven't seen any news comments.

http://www.cnbc.com/id/100003242?trk...ts:us:20910258

[badcompany]

Originally Posted by whodoyoulike

Just noticed a close at 8,949 a drop of 249 (-2.71%). Is this unusual? What does this mean? I always read the transport index was a good general market indicator. I haven't seen any news comments.

http://www.cnbc.com/id/100003242?trk...ts:us:20910258

As a result of the shale oil boom, rail stocks have had a tremendous run, as much of the oil from the Bakken and Permian are transported via rail. The recent drop in the price of oil has hit these stocks.

The Canadian Rails got hit particularly hard, as much of the oil from the Bakken in North Dakota comes east through Canada.

[whodoyoulike]

Thanks,

I guess I'm not following how lower oil prices would reduce rail volume. Unless the lower oil prices is reducing production and shipping. Is that what you're saying? The transport index also includes trucking plus I believe UPS and Fed Ex. Is it related to holiday sales dropping (if it is dropping)? But, I've been doing my share of on-line shopping.

I just noticed no news article(s) regarding the drop.

[whodoyoulike]

First article I've seen regarding drop. I don't get it.

http://www.marketwatch.com/story/dow...-up-2014-12-01

Although it might make sense for transport stocks to be hurt by rising oil prices, as that implies higher fuel prices, the previous eight days this year that the Dow transports fell more than 2%, oil prices actually declined.

[badcompany]

Originally Posted by whodoyoulike

Thanks,

I guess I'm not following how lower oil prices would reduce rail volume. Unless the lower oil prices is reducing production and shipping. Is that what you're saying? The transport index also includes trucking plus I believe UPS and Fed Ex. Is it related to holiday sales dropping (if it is dropping)? But, I've been doing my share of on-line shopping.

I just noticed no news article(s) regarding the drop.

You basically answered your own question.

The rails are making a fortune shipping oil, but, that oil coming out of the Bakken and Permian is expensive to get out of the ground. With dropping oil prices, it will stay in the ground.