FedEx, UPS shares grow to power Dow transports to 9th straight gain

UPS’s stock UPS,
+ 1.71%
rose 1.7% to a record close to $ 159.59, and climbed 12.2% amid a 5th-straight gain.

FedEx’s share price gain of $ 16.45 added about 100 points to the price of Dow transports, while UPS’s $ 2.69 price gain was about 16 points.

Meanwhile, the Dow DJT transports,
+ 2.72%
shot 289 points, or 2.7%, to the highest density since February 21, and to outperform the Dow Jones Industrial Average DJIA,
+ 1.30%,
which rose 358 points, or 1.3%.

The Dow shipments are up 12.0% amid a 9-day profit stretch, which would be the longest such stretch since the 9-day stretch ending Jan. 12, 2018.

One of the most important tenets of the Dow theory of market analysis, which has maintained its relevance among chart watchers for more than a century, is that both the Dow transport and Dow industry had to confirm each other’s trends to make a significant dent. to validate as bear-market signal. Read more about how the Dow Theory hits the broader market.

Also read: Do not do the Dow Theory, just because it is more than 100 years old.

One of the basic ideas behind the Dow theory is that transportation takes what the industry makes, so if people do not buy and deliver products on products that are made, the economy cannot be in sync.

“It is positive to see transportation, the area of ​​the economy connecting products to consumer demand, breaking higher,” wrote JC O’Hara, chief technology officer at MKM Partners, in a note to customers. “When we talk to the transport sector, we need to highlight the recent price action [FedEx] and UPS. This gives us insight into the consumer. ”

Both the transportation and the industry were now trading above their June highs. This helped confirm another basis of Dow Theory, which states that uptrends are defined by patterns of higher highs and lows.

FedEx’s share (FDX) rose Monday after Bernstein analyst David Vernon went bullish, saying “the global recovery absolutely, needs FDX positive.” He raised his rating to better, having performed in the market since October 19, 2019, while pushing his price target to $ 225 from $ 176.

He based his upgrade on better home delivery prices, continued strength in FDX’s Express and air traffic rates, and an increase in ground-based margins.

“Expectation of packages for e-commerce is expected to remain strong as the advancement of e-commerce penetration has the delivery capacity tense,” Vernon wrote in a research note. With UPS looking for ‘better, not bigger’, FDX emphasizes the emphasis on returns and the [U.S. Postal Service] reducing capacity, the rate environment at present is excellent. ”

UPS said Friday it plans to impose fees on large skippers during the holiday season of as much as $ 3 per package for shipping land and up to $ 4 a package for air shipments to homes, to cover the extra cost to prepared for a flow in online orders. That news comes about a week after UPS reported a big second-quarter beat.

Do not miss: UPS rockets to the best day ever, as surprisingly strong consumer demand produces big profits beat.

BofA Securities analyst Ken Hoexter raised his price target on the share of UPS to $ 176 from $ 151, while reiterating his buy rating, saying the bids highlight management’s new focus on price, margins and returns.

Hoexter said the essence of a call he hosted on Friday with UPS Chief Financial Officer Brian Newman was that the changes UPS had made to “get better, not get bigger.” That was a shift from UPS’s previous strategy, in which margins were hurting because the company often made concessions to large skippers to win the volume of e-commerce.

“Given that UPS provides both a critical and difficult-to-replace service for many of its customers, we believe this strategy change can drive a multi-year tailwind for financial results,” Hoexter wrote.