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Dow Transports Soaring High

The Dow Jones Transportation Index has rallied nearly 9% today for its best day since September 5, 1939! With the gain today, the Dow Transports is now up 40% from its March low of 2,134.21 - outpacing all the other major averages, which are up about 25% to 30%.

Bulls would argue that the index’s recent strength may in fact be a good indication for the broader economy. Many note that a recovery in the sector is one of the first signs of improving economic conditions. Remember, as the overall economy improves and consumer demand begins to rebound, companies will need to ship more goods from one place to another via trains, trucks, and planes.

Eyes, no doubt, will continue to be on this sector during earnings season, as investors will be on the lookout for any comments on current volumes and traffic trends, as well as any guidance the transports companies provide for the second half of the year.

On the other hand, bears may be more skeptical of this move. They would point out that this rebound may purely be a severely oversold rally in one of the markets’ more beaten up sectors. After all, despite this strong gain over the past month, the Dow Transports is still down 15% on the year – UNDERPERFORMING the rest of the major indices. So far this year, the Dow Industrials is down 8%, S&P 500 is down 7%, Nasdaq Composite up 2%, and Russell 2000 is down 9%.

Additionally, even with the 40% rally in just under one month, the Dow Transports still remains 46% below its all-time high of 5,536.57 set back on May 19, 2008. The stocks have been hit especially hard by the economic slowdown as all the transports – from airlines to shippers to truckers – have cited significant drops in customer demand over the past several months.

Here are the impressive returns for the Dow Transports’ 20 components since the index’s low on March 9:

Since Low YTD
YRC Worldwide +216% +96%
Ryder System +65% -18%
GATX +63% -27%
Continental Airlines +57% -44%
Con-Way +53% -24%
FedEx +46% -22%
JB Hunt Transport Services +40% -1%
United Parcel Service +39% -3%
CSX +39% -10%
JetBlue Airways +39% -40%
Norfolk Southern +38% -21%
Southwest Airlines +37% -18%
Union Pacific +35% -5%
Alexander & Baldwin +34% -13%
Landstar System +32% -5%
AMR +29% -67%
Expeditors International +29% -7%
Burlington Northern +28% -13%
CH Robinson Worldwide +27% -12%
Overseas Shipholding +21% -38%

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