Closely watched transportation shares and exchange traded funds have rallied this week on central bank liquidity measures and hopes the economic picture is brightening.
“The domestic transportation sector is a widely perceived leading indicator of the U.S. economy. While some traffic is less economically sensitive, such as agricultural products, much of the demand for what transportation companies carry correlates to economic activity. Throughout 2011, freight demand showed mixed signals at best,” Robert Goldsborough wrote for a Morningstar ETF analysis.
The iShares Dow Jones Transportation Average Index Fund (NYSEArca: IYT) lost 12% over the first three quarters of 2011. The S&P 500 lost about 5% in the same time period, reports Morningstar. [Transportation ETF Rolls Over]
With the holiday rush approaching, transportation stocks may have a last chance to rally in 2011. Major holdings in IYT include UPS (NYSE: UPS) and FedEx (NYSE: FDX), which could see action over the holiday shopping season. [Transportation ETF Breakdown Signals Recession Risk]
The overnight delivery firms do have good overseas exposure as well, which can be critical to growth, adds Goldsborough.