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A Kansas City Southern locomotive sits in a rail yard in Kansas City, Mo. on Wednesday, June 21, 2017.Nick Schnelle/The Globe and Mail

Add this to worries about Wall Street: The index of planes, trains and trucking companies, considered an important stock barometer of the U.S. economy’s health, is struggling.

The Dow Jones Transportation Average has swooned 10 per cent this month, a far steeper decline than that of the Dow Jones Industrial Average or the S&P 500. For analysts who closely watch the transports, this could be a sign of deeper market stress.

The transports were dealt another blow late on Thursday when U.S. President Donald Trump vowed to impose a tariff on all goods coming from Mexico until the flow of illegal immigrants across the southern border ceases.

In response, the Dow transport index dropped nearly 2 per cent in opening trade on Friday, with the S&P 500 down 1.4 per cent. Rail operator Kansas City Southern, which derives a big portion of its revenue from Mexico, saw its shares tumble about 6 per cent, while rail company Union Pacific Corp fell 2.7 per cent.

The Dow transports started 2019 strong along with equities in general. But while the S&P 500 minted a new all-time high in April, the Dow transports have so far failed to reclaim their record peak set last September.

Now, with stocks also hit by concerns about a growing U.S.-China trade dispute, the Dow transport average is about 16 per cent below its Sept. 14 all-time closing high.

“I see the performance of the transports really making it difficult for the broad market to sustain a big upward move,” said Chuck Carlson, chief executive officer at Horizon Investment Services in Hammond, Indiana.

The transport stock weakness compounds other investor concerns, including that the U.S. trade war with China and other countries will harm the global economy and whether an expected pick-up in U.S. corporate profits will materialize later in the year.

The 20 stocks in the Dow transport index, including airlines such as Delta Air Lines, Inc., rail operators like Union Pacific and package delivery companies FedEx Corp. and United Parcel Service Inc. are “leading indicators of the economy,” Miller Tabak equity strategist Matt Maley said.

Therefore their underperformance, according to Mr. Maley, is a “sign that growth in the U.S. economy was starting to slow even before the trade negotiations started breaking down.”

This year, as the market rebounded from its late-2018 dive, the transport index closed at 11,098.99 on April 24, within about 4 per cent of its all-time peak last year. But by this week, the DJT had dropped below 10,000, a technical support level that Mr. Maley and other strategists have been watching.

For the third time in recent months, the Dow transports fell to their lowest level compared with the Dow industrials since 2012, according to Refinitiv data, another indication of the stocks’ struggles.

The transports and the industrials are often linked together for investors who follow Dow Theory, which tracks the two indexes to determine trends for the overall stock market.

Like the transports, the Dow industrials have yet to eclipse their all-time closing high, which was set in October. The industrials also recently joined the transports in trading below their 200-day moving averages, a key technical indicator for trends.

“Historically, what has been the best for markets is both the industrials and transports above their longer-term trends, but at this point it probably calls for further consolidation,” said Will Geisdorf, ETF strategist at Ned Davis Research in Venice, Florida.

“The market is going to have a tough time ripping higher from here without some leadership from the transports,” Mr. Geisdorf said.

The sluggish performance of transport stocks stems largely from one reason, according to Baird analyst Ben Hartford: slowing economic growth.

In a late-cycle economic environment, Mr. Hartford said, “until there’s confidence that growth rates are going to bottom and re-accelerate, transport stocks and cyclically sensitive stocks in general” tend to lag the broader market.

Among the Dow transports, airline, trucking and package delivery stocks generally have underperformed the S&P 500’s nearly 10 per cent gain in 2019. For example, UPS shares are off about 3 per cent this year, United Continental Holdings Inc. has dropped 6 per cent, while J.B. Hunt Transport Services Inc. has slumped over 9 per cent.

But rail stocks have fared better, even with Thursday’s Mexico tariff threat, with Union Pacific climbing over 19 per cent in 2019, and Norfolk Southern Corp. rising 30 per cent.

Rail companies have demonstrated efficiency through cost-cutting and other means, according to Mr. Hartford. They also do not face the same level of perceived structural threats to their overall businesses from Inc. that package-delivery and trucking companies do, he said.

But even for rails, measures of volume show caution. For example, the Cass Freight index showed a 3.2 per cent decline in shipments in April, its fifth month in a row of negative volume. Meanwhile, according to Mr. Hartford, U.S. rail carload growth has been negative in the second quarter so far, compared with a year ago.

If the railroad stocks falter, that knocks down the main pillar that has kept the Dow transports from more significant underperformance.

“I’ll be watching to see if the recent roll over in the rail data, which has been disappointing, is followed up with a roll over in the railroad stocks,” Mr. Maley said.