Struggling Dow transport stocks could be economic warning signal

It’s been a banner year for the major U.S. stock indexes, but one economically sensitive corner of the market sticks out as a sore spot.

Some investors said the struggles for the 20-stock transport index - which includes railroad operators, airlines, package shipping companies and trucking firms - could signal weakness in the economy or prevent the broader market from making significant further gains unless they bounce back. Other areas that have struggled include small cap stocks, which some analysts believe are more sensitive to economic growth than large caps, as well as real estate shares and some high-profile consumer stocks such as Nike, McDonald’s and Starbucks.

“There is something to be said about the guts of the market not necessarily confirming all-time highs in the overall S&P 500,” Miskin said. “So softness in some of the transports, I think do warrant some caution.” Meanwhile, another group also considered to be an economic bellwether - semiconductors - has fared much better.

But the fact that the transports closed at their lowest point since November on Wednesday is worrisome, he said.

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