TheStreet.com 21: A New Index for the Economic Recovery

Is it here yet? Economic recovery, the missing link in this year's stock market rally, may be buried under thousands of quarterly earnings reports due out this month.

For investors who can't dig through every one, we've created TheStreet.com 21. This index of 21 companies is designed to be a leading indicator of the economy's direction for the rest of the year and beyond.

Earnings season is always important, and this summer is unusually critical. In the slew of second-quarter earnings reports, companies will reveal their outlooks for the rest of the year, confirming or denying whether an economic recovery -- the basis for this year's remarkable rally -- will in fact materialize.

But the data dump from corporate America will be confusing and contradictory at times. Some reports will be irrelevant, while others will be vitally important. Knowing the difference is critical for investors.

We've selected 21 companies that are extraordinarily suited to serve as a reality check for the rally. The 21 companies represent a diverse range of industries, but unlike indices designed to represent the broader market, such as the Dow Jones Industrial Average or the S&P 500, TheStreet.com 21 doesn't represent every sector of the economy. Our goal in choosing TheStreet.com 21 was to select stocks that were hypersensitive to the times. If the economic landscape truly has improved, TheStreet.com 21 should reflect it first, and rise accordingly. If the economy is stalling, the index will decline -- a harbinger of bad news to come.

Click here to see the entire chart of TheStreet.com 21 components, including the reasons for their inclusion.

We will be tracking our new index on a daily basis, while reporting the major news of each component and explaining how it alters the outlook for a recovery. TheStreet.com 21 has been assigned an opening value of 1000, based on the closing prices of the 21 components' share prices on July 3. At the end of each trading session, we will calculate the new value of TheStreet.com 21 and post it on the site the next day. TheStreet.com 21, by design, is heavily leveraged to U.S. economic activity and may prove more volatile than broader market indices such as the S&P 500. Indeed, its first two trading sessions bear this out: TheStreet.com 21 rose 2.7% to 1027.35 on Monday, compared with the S&P 500's 1.9% gain. In Tuesday's more sedate session, the TSC 21 edged up 0.3% to 1030.06, mirroring the S&P 500's 0.3% gain.