Transport Companies May Reach Level Bullish for Stocks: Technical Analysis

Transportation companies are close to a level that may help drive more gains for U.S. stocks, said Christopher Verrone, at Strategas Research Partners.

The Dow Jones Transportation Average, which includes bellwethers FedEx Corp. and United Parcel Service Inc., rose to the highest level since May 3 yesterday and touched its September 2008 high on an intraday basis. Should the 20-member gauge of railroads, trucking companies and airlines close above yesterday’s intraday high of 4,824, it would send a bullish signal for the Standard & Poor’s 500 Index, Verrone said.

“Those are economically sensitive groups leading the push in the markets,” Verrone, lead technical analyst at Strategas, said in a telephone interview from New York. “It’s a pretty constructive backdrop. With the transports leading the push higher, the market’s advance may have the potential to extend into the first quarter.”

The S&P 500 has risen as much as 16 percent since reaching this year’s low in July as companies reported earnings that beat analyst estimates and the Federal Reserve indicated it will buy bonds to stimulate the economy.

Of the 13 Dow Transportation companies that reported results since Oct. 7, 69 percent have topped analysts’ per-share earnings estimates, according to data compiled by Bloomberg. Sales increased 16 percent for the group.

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net.

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net.

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