Live Markets: The CAR that's driving the Dow Transports

Avis Budget

21/04/2026 19:05

Main U.S. indexes modestly red; S&P 500 down ~0.4%

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THE CAR THAT'S DRIVING THE DOW TRANSPORTS

The Dow Jones Transportation Average .DJT is eyeing a record monthly gain, at least based on LSEG data, which goes back to 1988. But while the index is often viewed as a barometer for the health of the U.S. economy, investors might need to take a more nuanced look at its dramatic 24.8%-plus gain so far this month if they are looking to measure the broader economy.

One key item under the hood of the DJT's gains is an inordinate skew upwards from one stock - Avis Budget Group CAR.O. While the rental car company may be described as a household name, it is not typically known as a market heavyweight, by any stretch.

CAR rose as much as 22.3% earlier on Tuesday to hit a record price of $744.85, before losing some steam as the broader market turned lower. It was last up more than 12% on the day. This was after it hit an intraday record high and closed up 23.3% on Monday. In all, CAR shares are up more than 370% month-to-date after already rising nearly 50% in March. The stock is up more than 430% year-to-date.

With the DJT up about 37% or more than 6,400 points so far this year, nearly 3,700 points of the gain are thanks to CAR. It's responsible for around 57% of the DJT's advance. Without CAR, the DJT would be up around 16% YTD. It should be noted that this still looks good compared with the S&P 500's 3.5% gain. And besides CAR, the DJT's next biggest contributor to its year-to-date advance is
FedEx
 FDX.N, which, pricewise, is up more than 36%.

Adding to the murkiness, the main reason for the Avis rally does not appear to be fundamental but, rather, a short squeeze, which has dealt steep losses to short sellers, who sell borrowed stocks with a view to buying them back at a lower price to repay the debt and then pocket the difference.

In a research note, S3 Partners' head of predictive analytics, Ihor Dusaniwsky, noted that on the fundamentals side, Avis reported "larger-than-expected net GAAP losses last quarter, lower-than-expected EBITDA and increased leverage."

He does point to some near-term positivity around the stock from recent TSA-related air travel issues, which buoyed rental car demand. And he notes that "large holdings by SRS Investment Mgt. and Pentwater Capital Mgt. and an online 'meme-ish' bullish call on the stock helped drive CAR stock prices higher."

But a key factor is that 7.1 million shares of CAR have been sold short, representing 43.2% of its float, according to S3. They also point to stock borrow utilization at 89% and say there are fewer than 900,000 shares available to borrow to support additional short positions. Because of this scarcity S3 says stock borrow rates are in the 3.25% to 4.25% fee range.

With all this, Dusaniwsky writes, "Expect more volatility in CAR stock prices going forward, and much like NASCAR, watching the race is exciting but the crashes can sometimes be spectacular."

So what about the transportation average? Fundstrat's head of technical strategy, Mark Newton, acknowledged that CAR's move was likely due to a short squeeze. But he still sounds hopeful about the DJT,  noting that "while the near-term gains appear parabolic, this likely won’t provide an immediate pullback just yet, given the speed and percentage gains of the last few weeks."

"It’s technically right to overweight Transportation stocks along with the Industrials sector," Newton said.

(Sinéad Carew, Terence Gabriel)

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(Terence Gabriel is a Reuters market analyst. The views expressed are his own)