Industrials Roll Over as Transports Motor On!

As the US economy slowly regains its vigor, Dow Theory continues to suggest no end in sight despite a vicious across-the-board sell off on Thursday. The following chart compares the performance of the Dow industrials versus the Dow transports over the past 12-months. Clearly you can see the more popular sector lagging while transport stocks were lifted to record highs as if investors were starved of good quality stocks and craving a pull back. This is a healthy sign especially in light of the lack of domestic catalysts prompting the recent move lower.

Shares in GATX Corporation (GATX) were propelled to an all-time peak at $60.00 as the freight leasing company announced earnings that exceeded expectations, boosted its forecast and announced yet another sizable stock repurchase program. Its shares are higher on the day by 15.7% and carry a 4.3% weighting within the Dow transports index helping buoy the average around the unchanged mark. Note that earlier the index bucked the downdraft and rose to a record. Shares in Union Pacific (UNP) – the heavyweight within the transports benchmark at 12.5% – gained by 2.74%. Norfolk Southern (NSC) and Kansas City Southern (KSU) are also in positive territory for the session.  These four stocks comprise almost one-third of the Dow transports index.

Chart – Dow Transports and industrials compared

About Andrew Wilkinson 1023 Articles

Affiliation: Interactive Brokers

Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.

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