There is sharp weakness in transportation stocks today, with the Dow Jones Transportation Index down almost 2%. This week's economic news presents challenges for transportation stocks, which might be one of the reasons for the sector's weak performance today.
On Wednesday, for example, last quarter's gross domestic product is expected to be revised down by an unusually large amount, to a 2.3% gain instead of the previously reported 3.5%. On the same day, the Chicago Purchasing Managers index is expected to rise to just 50.0 from 48.8 in January, suggesting flat factory activity. On Thursday, the Institute for Supply Management is expected to also report flat activity, with a reading of 50.0 versus 49.3 in January. Weak data on industrial output is synonymous with weakness in shipping, which is a negative, of course, for the transportation sector.
I would argue that the factory sector is poised to see better activity in the coming months owing to big declines in inventories. This supports the bigger picture on the transports, which have gained in part on this very thesis.
P.S. Will you be there when Cramer makes his next move?
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Tony Crescenzi Blog Keys to the Week Ahead 2/23/2007 4:26 PM EST Here are the data releases that'll be making headlines next.
Tony Crescenzi Blog Treasuries at Key Level 2/23/2007 1:56 PM EST A yield break of 4.66% on the 10-year would begin to invalidate the selloff.
Tony Crescenzi is the chief bond market strategist at Miller Tabak + Co., LLC, and advises many of the nation's top institutional investors on issues related to the bond market, the economy and other macro-related issues. At the request of the Federal Reserve, Crescenzi is a regular participant in the board's Livingston Survey of economic forecasters. He is also the author of the revised investment classic, The Money Market,
first published in 1978 by Marcia Stigum, and The Strategic Bond Investor. At the time of publication, Crescenzi or Miller Tabak had no positions in the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Crescenzi also is the founder of Bondtalk.com, a popular Web site covering the bond market and the economy. Crescenzi appreciates your feedback; click here to send him an email.
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