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Need Transportation To Fly By Charles Payne

It was a tough session for transportation names after Ryder(NYSE:R) lowered guidance and a second-tier brokerage firm lowered its ratings and targets on Jet Blue (NASDAQ:JBLU) and American Airlines (NASDAQ:AAL). We cannot ignore that this is the moment of truth for transportation names. I'm old school and the Dow Theory underscores the importance of transportation names to corroborate broad stock market rallies. Yesterday, the index turned down to its 200-day moving average of 8310, but remains well above the 50-day moving average of 8,052.

What's making the travails of transportation names more perplexing is the free fall in crude oil. Intuitively, that alone would have seemed a gift; yet it's been a non-issue. As proxies for the national -and to an extent- the global- economy, the action in transportation would seem to hint at an oncoming recession. Yet when pulling back for a longer-term view this pullback might just be natural. It was trading at 4,891 back in November 2012, and recently hit a high of 9,412, almost a double.

So, I am not panicking per se, but I think transportation is edging higher to add legitimacy to the next broad market attempt.

After the bell, CSX posted financial reports for the quarter that missed slightly on revenue and beat slightly on earnings per share. There weren't any real surprises, save for the decline in housing-related volume. I noticed volumes were only lower for phosphates and metals, in addition to the aforementioned housing supplies. But just about every segment says that the revenue decline points to a lack of pricing power.

However, the spike in auto demand drove the lone exception intermodal.

Coal was down 18% on volume and 19% on revenue; domestic and exports face headwinds, heading into 2016. Overall, the report held few surprises, but it wasn't a disaster. On a company-specific level, management did a great job lowering expenses by 11%. A proxy for the economy points more to plodding along at a pedestrian pace- at best.

Moreover, the one thing I am worried about are prices in general. Yesterday, the National Federation of Independent Business (NFIB) small business survey, showed how tough it is to raise prices in the current economy. Planned prices just aren't anywhere near coming to fruition. The Fed has talked about importing inflation from China and it seems there are cracks in the dam.

Today's Session

Stocks are drifting lower on a smattering of economic and earnings news. There have been no blockbuster bears or monumental misses so investors continue to wait for that spark. Retail sales were largely flat up on the strength of auto sales, but savings from cheaper gas not flooding the rest of Main Street. There are a few segments that saw month to month gains to go along with year over year trends.

Retail Sales

September

M/M

Y/Y

Motor vehicle

1.8

9.3

Furniture

0.6

5.3

Sporting Goods

0.9

5.5

Food Services

0.7

7.9

Clothing

0.9

4.7


We're combing bank earnings results and will have an update in the afternoon note. Overall, this will be a lackluster start out the gate.