Railroad stocks slide amid broader economic concerns

In a volatile economy punctuated by wild stock market swings, the stock prices of several major railroads slid “as the broader market tumbled on concerns about the fragility of the economy and a report that said traffic on U.S. railroads fell last week,” the Associated Press reported Thursday.

That report was the August 18 Association of American Railroads weekly traffic report, which showed that U.S. carload freight traffic for the week ending August 13 was down 1.2%, and U.S. intermodal traffic for the week was virtually flat, up 0.8%, compared with the same week in 2010. Several commodity groups fell by double digits: farm products excluding grain, down 25.1%; waste and nonferrous scrap, down 20.3%; and nonmetallic minerals, down 13%. These losses were partially offset by double-digit increases in: metallic ores, up 25.2%; iron and steel scrap, up 22.4%; and petroleum products, up 15.8%. Overall, 11 of the 20 carload commodity groups AAR charts posted increases from the comparable week in 2010.

In late afternoon trading, Union Pacific stock fell $6.27, or 6.8%, to $85.66. CSX dropped $1.43, or 6.3%, to $21.13. Norfolk Southern dipped $3.64, or 5.3%, to $64.66.

“Railroads tend to be an indicator of broader economic health because they carry so many things that consumers use every day,” the AP noted. “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%. So far this year, traffic on U.S. railroads is up 2.1% from the same point last year, highlighting the economy’s slow growth.”

In contrast to U.S. results, Canadian carload freight traffic rose 2.2% compared with the same week last year, while intermodal volume fell 0.3% compared with 2010. Mexican freight carload traffic rose 2% compared with the same week last year, and intermodal registered a huge gain, up 42.6%.

Combined North American freight carload volume for the first 32 weeks of 2011 on 13 reporting U.S., Canadian, and Mexican railroads was up 2.2% compared with the same point last year, while intermodal was up 6.2%.