Stock performance in the transportation sector has been very uneven, reflecting the varying fortunes of particular industries within the sector. The median year-to-date-stock price has declined for all industries in the Zacks' transportation universe, as shown below, and compares to a 6.4% stock decrease for the S&P 500.

• Equip & Leasing (19.0)%
• Air Freight (15.0)%
• Trucking (12.4)%
• Airlines (10.7)%
• Railroads (8.4)%
• Shipping (1.3)%

Among the hardest hit have been air freight and trucking, where volumes are dropping precipitously, reflecting the impact of the global economic slowdown. Shipping has done surprisingly well, outperforming the S&P 500, probably due to the fact that the stocks were so badly mauled last year, with a median 2008 price decline of 63.1%. We believe there are a number of countervailing factors that will affect the transportation sector within the coming months:???

• Volume weakness - as the global recession takes hold, we expect volumes to weaken from current levels as fewer businesses ship goods, whether by air, sea, rail, or road, and fewer individuals decide to travel, which will hurt airlines?? ?
• Waning pricing power - to date, pricing has been fairly solid, particularly in those industries that are able to pass through rising fuel costs through fuel surcharges, such as railroads and trucking. Airlines have managed to add revenues through surcharges for second bags and other items. However, as the recession takes hold, we expect revenues to come under pressure, due to competitive pressures as companies fight for a share of a smaller pie?? ?
• Falling fuel prices fall - declining fuel prices, a significant line item on income statements for many transportation companies, should help alleviate cost pressures; on the negative side, this will hurt revenues as fuel surcharge revenue recedes

In the past week or so, DryShips Inc. (DRYS) has made several announcements that reflect the dire straits of the dry bulk shipping industry. These include the breaching of certain loan covenants; the sale of common stock; the slashing of 2009 capital spending plans; the elimination of the dividend; and reduction in earnings guidance for the fourth quarter.