According to a report from the Wall Street Journal,the Dow Jones Transportation Average, a 20-member index of airlines, railroads and trucking companies, slumped more than 3% at session lows Friday. The decline comes after the index set a record high on Thursday, bucking the broader trend of declining stocks, currencies and emerging markets.
. Followers of the age-old Dow Theory generally look for the industrials and transports to move in tandem to confirm a market’s trend. The theory’s ideology stems from the notion that making goods is one leg of the industrial economy and moving those goods around is the second leg, so their trends should be in sync.
Ahead of Friday’s action, the Dow Jones Industrial Average was down 2.3% this month, while the Dow transports were up 2.3%. With the transports holding up, there was hope that the rest of the market would reverse course and follow their lead.
Friday’s slump throws some cold water on that theory.
