Shares of Union Pacific Corp and Norfolk Southern rose on Thursday after major U.S. railroads clinched a tentative deal with unions for better pay and working conditions, narrowly averting a rail shutdown.
Even if the unions reject the proposal, a rail shutdown that could have happened as soon as midnight on Friday has been averted for several weeks. A shutdown could have cost the U.S. economy $2 billion per day and led to food and fuel supply disruptions across the country."To the market, it's just avoiding bad news.
The deal also offers some relief to investors already grappling with the impact of the Federal Reserve's relentless interest rate hikes to curb surging inflation. Wall Street suffered its worst day in more than two years on Tuesday after a hot August inflation report fueled bets of more aggressive monetary policy tightening.
"Digging deeper, many might have wondered how much of an impact a strike might have on rate rise discussions due to the potential impact on inflation," said Danni Hewson, financial analyst at AJ Bell.
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