Over the past few months, the DJTA has declined along with the broad market averages. Usually, the transportation index can give us a good indication of growth in the economy. Transportation companies charge freight rates based on demand. If demand is strong, higher rates can be charged, improving transportation companies' earnings. When demand is soft, the opposite occurs. While so far the DJTA has declined along with the broader market, the index and company earnings (such as Fedex, UPS, & CSX Corp) should be watched carefully. A continued decline in the index could be a precursor of slower growth, while a rebound in the index and transportation stocks should point to at least stable demand in the intermediate term.
