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The green light has been given to transport stocks.
And that could be a good signal for both the economy and the broader stock market.
Inside the action: The Dow Jones Transportation Average (^DJT) has surged 29% in the past month, dusting the 7% gain in the Dow Jones Industrial Average (^DJI). The Dow Jones Transportation Average is more than 35% above its 200-day moving average, the widest spread since 1989, according to BTIG chief market technician Jonathan Krinsky. Since 1950, it has been 35% or more above its 200-day moving average only four times: 1951, 1971, 1980, and 1989.
What is the Dow Transportation Average: The Dow Transportation Average consists of 20 transportation stocks, mostly in the railroad, airline, and logistics sectors. Several of the better-known names in the average include Avis (CAR), Norfolk Southern (NSC), UPS (UPS), FedEx (FDX), and CSX (CSX).
The latest push higher in the transports has been led by an outsized move in Avis, which is up 509% in the past month. Yahoo Scout AI says the Avis rally reflects a massive short squeeze, whereby those betting against the stock are being forced out by epic upside momentum. In other words, they have to cover their short position.
But other transport stocks have also done well in the past month.
United Airlines (UAL) is up 10%, Knight-Swift Transportation (KNX) has gained 23%, and FedEx (FDX) has climbed 9.5%.
Why it should matter to investors: This index acts as a leading economic indicator — if goods are being produced, they have to be shipped. Hence, if transport stocks are outperforming the broader market averages, it could be a signal that the economy is stronger than expected.
Bottom line: The surge higher in transport stocks has truly flown under the radar of most investors. As of today, the bullish action feeds into the consensus view that the economy’s fundamentals are solid and are withstanding the Iran conflict. Now this has to be proven out in spring economic data releases and first quarter earnings from truckers and railroads.
The bar has been set far higher on the economy, at least as seen through the prism of transport stocks.
Brian Sozzi is Yahoo Finance’s Executive Editor and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.
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