It’s been a rough ride for transportation stocks, with the Dow Jones Transportation Average losing more than 6% of its value this week. The index is down about 25% from its 52-week high, putting it into bear market territory.

Within the transportation sector, railroad stocks were particularly hard hit after Citigroup analyst Christian Wetherbee downgraded shares of CSX (CSX), Norfolk Southern (NSC), and Union Pacific (UNP) all from “buy” to “hold” amid concerns that inflation could hurt demand for shipping, while raising costs for gas and labor. 

Wetherbee said he had been bullish on rail stocks amid weakness in the trucking industry, viewing rails as a relative safe haven in the current environment of rising inflation and geopolitical uncertainty. However, Wetherbee said the sector’s outperformance and expectations for high earnings growth made him believe that rail stock performance will be relatively muted going forward. 

CSX and Norfolk Southern shares fell more than 4%, while Union Pacific shares were down nearly 5%.

If Dow Theory teaches us anything, it’s that transport stocks, like railroads, are historically leading indicators for market trends. The decline in transports and industrials, like the one we are witnessing now, is a pretty strong indicator that the market trend will be lower for some time.