Why United Parcel Service Stock Slumped by 5% on Tuesday

The logistics sector is not currently in favor with investors, to put it mildly, and United Parcel Service (NYSE: UPS) stock was bearing the brunt of this on Tuesday.

The lingering disappointment of a peer's quarterly earnings report, fears about the damaging effects of aggressive tariffs, and a pundit's price target cut sent UPS's shares down on the second trading day of the week; they closed the session more than 5% lower in price. The S&P 500 index fared better, relatively speaking, by essentially flatlining across the day.

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All it took was a mild catalyst

The immediate catalyst was that price target reduction. This was made by analyst Ken Hoexter from influential lender Bank of America's Securities unit.

Hoexter's cut was more like a modest trim, as his UPS price target was lowered only to $129 per share from the preceding $133. Despite the gloom blanketing the logistics sector generally, the analyst maintained his buy recommendation.

It wasn't immediately apparent why he made this move, but it came at a dicey time for UPS' industry. As it and fellow parcel hauler FedEx are considered cyclical businesses due to their servicing every conceivable part of our economy, investors are worried that the looming tariffs promised by the Trump administration will negatively affect their volumes.

The FedEx effect

Compounding that, FedEx isn't exactly turning out to be the stock of the month. On Thursday, it published its fiscal third quarter of 2025 figures. While the company notched a beat on the consensus analyst estimate for revenue, it whiffed on earnings. Worse, it cut both its top and bottom-line guidance for the entirety of the year.

If FedEx is struggling, it's entirely realistic to imagine UPS wrestling with the same conditions. Investors are right to be wary of logistics sector stocks just now.

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Bank of America is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America and FedEx. The Motley Fool recommends United Parcel Service. The Motley Fool has a disclosure policy.