Dow transport average struggles to keep pace, could be market warning sign

© Reuters. Traders work on the floor at the New York Stock Exchange (NYSE) in New York

By Lewis Krauskopf

NEW YORK (Reuters) – The Dow Jones Transportation Average is struggling to get into gear and that could be a sign the market is ready to stall further.

The 20-component index of rail operators, airlines, truckers and package delivery stocks is seen by many investors as a barometer of economic activity, and it is failing to keep up with other key market measures.

The Dow transports () slumped more than 2% on Wednesday, in line with declines for the broader market, as a closely watched bond market indicator pointed to a renewed risk of recession. Yields on U.S. 2-year Treasury notes rose above the 10-year yield on Wednesday, the first such inversion of the yield curve since June 2007, a potential warning sign for investors.

While other major U.S. averages have set all-time highs in 2019 amid a broad equities rally, the Dow transports only came within 4% of its Sept. 14 record, doing so on April 24. Since then, the transports are down more than 10%, and more than 14% from its September record.

(Graphic – Dow transport index performance: https://tmsnrt.rs/2YO4QaJ)

The 123-year-old Dow transport average has climbed 8% this year, and more than 14% since Dec. 24, when the overall market made a recent bottom. But those gains have trailed other major indexes; for example, the Dow Jones Industrial Average () is up about 10% in 2019 and 18% from Dec. 24.

(Graphic – Rebounding off the bottom: https://tmsnrt.rs/2YOVdsD)

The Dow transports are often analyzed relative to the Dow industrials to determine the overall direction of the market. When compared to the Dow industrials, the Dow transports are around their lowest level since 2012.

(Graphic – Dow transports

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