Could Stock Market Get Wrecked By Railroad Stoppage?


Simpler Trading Team

4 min read

What happens when the trains come to full stop?

Many traders might not realize the importance of freight railroads and the market sectors this infrastructure system supports.

If the trains stop – including the cargo on them – the stock market could be in for a serious wreck.

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Railway worker strike could hit this week

Collective bargaining negotiations have been ongoing since August among unions representing U.S. freight railroad workers.

Workers have called for increases in wages and benefits in a time when consumers are suffering from 40-year high inflation and rising interest rates on long-term purchases such as cars and homes.

How can a railroad stoppage affect the stock market?

Walking off the job could cause a $2 billion daily economic hit, according to a report from the Association of American Railroads (AAR).

Consider how almost every U.S. or international company uses the railways to get products to consumers:

  • Big-rig, tractor trailer trucks can’t handle the fright load without rail traffic. It would take approximately 467,000 additional long-haul trucks per day to move all railroad freight. The U.S. already has a shortage of truck drivers.
  • Railroads haul about 1.6 million carloads and intermodal units annually of wheat, corn, soybeans, and other agricultural products. This along with 1.5 million units of animal feed, beer, birdseed, canned produce, corn syrup, flour, french fries, frozen chickens, sugar, wine and countless other food products. For those fresh groceries at the supermarket, fall harvests in the U.S. are right around the corner.
  • In the first half of 2022, more than 1,600 carloads of lumber and paper products – including wood to build homes, newsprint and magazine paper, cardboard for packaging, and scrap paper for recycling – were carried on railways.
  • Freight rail transports about 75% of the finished new cars and light trucks purchased in the United States each year, typically 1.8 million carloads of motor vehicles and parts.
  • Most of passenger carrier Amtrak’s nearly 22,000-mile system consists of tracks owned and maintained by freight railroads. Close to 70% of Amtrak service operates on tracks owned by someone else, mainly freight railroads.

Most unions associated with railroad workers have reached tentative agreements, while holdouts are in a “cooling off” period until Friday. Without agreements in place, a worker strike of more than 90,000 could hit the railways by the weekend.

There is a lot riding on American railways, and traders can compare which tickers on the stock market might be affected.

Rail freight affects market sectors, companies

A variety of sectors and companies listed in the stock market could be affected by a railway employee strike.

Sectors include home construction, e-commerce, energy, transportation, and retail. Companies include Lowe’s Companies, Inc. (LOW), Home Depot, Inc. (HD), WalMart, Inc. (WMT), Target Corp. (TMT), FedEx Corp. (FDX), and United Parcel Service, Inc. (UPS).

Any disruption in railway services doesn’t bode well for a stock market that has seen multiple days of higher gains, particularly in the sectors and companies mentioned above.

Cutting access to consumer products in these companies could not only negatively impact stock values, it could lead to higher inflation as demand surges for a more limited supply of goods.

How much can trains carry in products?

As an example, the AAR stated that a single railway container or trailer for UPS could contain 1,800 to 2,000 packages. That next train you see pass by at the railroad crossing with 100 containers or trailers could have 200,000 UPS packages headed for our doorsteps. 

Simpler’s traders are watching how these collective bargaining negotiations play out and how the catalyst of a railway worker strike could impact the market. A catalyst like this could cause large moves in the market in related sectors and companies.

AAR officials stated the position of railway workers and goals of ongoing negotiations.

“The railroads want, and continue to advocate for, a prompt resolution that would provide historic wage increases to rail employees – and allow the railroads to continue servicing customers and prevent further disruption to the struggling supply chain,” the AAR stated in a press release.