Unemployment News Hits Airline Stocks (CAL) (DAL) (ALK) (LCC)

Shares of airline stocks fell on Thursday after the market reacted to higher unemployment numbers and J.P. Morgan (NYSE: JPM) downgraded three airline stocks.

J.P. Morgan downgraded Alaska Air Group, Inc. (NYSE: ALK), Continental Airlines, Inc. (NYSE: CAL) and Delta Air Lines Inc. (NYSE: DAL) from Overweight To Neutral, after an unexpected rise in unemployment claims were reported. Shares of the three stocks fell from nearly 4% to 9%.

J.P. Morgan also upgraded US Airways Group, Inc. (NYSE: LCC) from Underweight to Neutral. US Airways shares fell, like most airline stocks, but not as steeply as those that were downgraded.

Higher unemployment numbers usually lead to fewer travelers. Still, J.P. Morgan insisted that it remains bullish on the airline sector.

"We expect 2010 industry total revenue to rise 11.4%, some 200 basis points better than our earlier forecast," said J.P. Morgan analyst Jamie Baker. "Historical sequential analysis ... suggests demand and earnings outcomes nicely ahead of consensus."