The recent strength in the industrial sector may be a reassuring sign to those worried about the U.S. economy.
Industrial stocks surged more than 3 percent last week, outperforming the broader S&P 500. The move comes along with a Wednesday report that industrial production increased more than expected in January, jumping 0.9 percent from a month earlier, compared to 0.4 percent estimates.
"Although [industrial production] data can be choppy, the growth in the manufacturing component is a very encouraging sign that the industrial sector may be stabilizing in our view," Lisa Berlin wrote Thursday in a Bank of America Merrill Lynch research report.
This year, market watchers and executives have referred to a potential "industrial recession," spurred by concerns about a slowdown in manufacturing and industrial production. The industrial sector has also served as a proxy for broader economic problems. JPMorgan and Deutsche Bank cited manufacturing last week as a troubling indicator when looking at recession risk.
"Seldom is the manufacturing sector in recession and the broader economy is robust," Deutsche Bank's Joseph LaVorgna wrote in a Thursday note, referring to continued concern over manufacturing data.
Slowing global demand, low commodities prices and a strong U.S. dollar have all contributed to the lag in industrial strength. Copper and platinum have both fallen 20 percent over the last year. However, falling commodities prices may be a boon to industrial companies' bottom lines, said Phillip Streible, senior market strategist at RJO Futures.
"If you look at their key operating costs, the key drivers are the industrial metals: platinum, palladium, copper and silver. They've all been beaten up severely over the last year and it's a benefit for [companies]," Streible said Friday on CNBC's "Trading Nation."
From a technical perspective, Craig Johnson of Piper Jaffray said the relative performance of industrial names compared to the overall market has taken a major turn.
"You're starting to see this nice turn up in this relative performance. It's caught the eyes of a lot of investors," Johnson said Friday on "Trading Nation." "Some of the true industrial companies are really starting to work."
"If these kinds of stocks are working now, it's a good sign that this economy is not as bad as everybody thinks it is," he said.