What happened

Shares of XPO Logistics (XPO -0.73%) traded down more than 10%, and shares of FedEx (FDX 1.23%) and United Parcel Service (UPS -0.34%) were each down more than 5%, on Monday morning, as COVID-19 coronavirus fears continue to rattle the markets.

As the outbreak grows so does its economic implications, adding to the risk of a prolonged slowdown that will ripple through supply chains and transport companies for months to come.

So what

Another weekend full of headlines about new reported coronavirus cases spooked markets on Monday, making it clear that the crisis is far from over. As the case numbers have spread, the idea that this outbreak will only briefly affect industrial output and consumer sentiment has lost credibility, and it is increasingly looking like the ramifications of coronavirus will linger through the first half of 2020 at least.

That's bad news for shippers, a sector that is closely tied to industrial output. In the near-term coronavirus fears could push more consumers to shop online, providing a bit of a benefit for companies like UPS or FedEx, but closed factories and uncertain demand will more than offset any online shopping gains.

A stack of cargo containers at a port.

Cargo shipments seem likely to decline through the first half of 2020 at least. Image source: Getty Images.

The closely watched Cass Freight Index was down 9.4% year over year in January, signaling potential weakness in the economy even before the coronavirus impact began to spread globally. The fear now is that the outbreak could exasperate that weakness, sending us into a full-fledged industrial recession.

The slowdown comes at a particularly sensitive time for XPO, which announced in January it was exploring selling one or more business units. While there is nothing to suggest permanent damage to supply chains, and buyers tend to be focused on the long-term, the uncertainty surrounding the coronavirus could slow decision making.

FedEx, meanwhile, was hoping to rebound from a miserable 2019 by showing positive momentum in 2020. It is going to be hard for the company to show growth in this environment, potentially turning what investors hoped would be a 2020 surge into a 2021 upturn at best.

Now what

This is an ugly market, and with the coronavirus unlikely to disappear overnight it is possible shares of XPO, FedEx, and UPS will continue to fall along with the broader market. But those with the risk tolerance to buy now will likely be glad they did in time.

I think all three of these shippers are intriguing at their current levels, but XPO in particular offers exciting risk/reward potential for those willing to buy in. The stock now trades below where it did when management announced a breakup. If XPO is able to find buyers for the businesses on the block at valuations close to what management had expected, the shares have plenty of room to accelerate quickly.

Of course, that's all dependent on them finding buyers. In a market plagued by uncertainty, investors don't seem interested in holding on to see how these businesses fare in the months to come.