Dow transport index hits 26-month high

The Dow Jones Transportation Index, a closely watched leading indicator of U.S. economic health, is closing in on levels not seen since the roof caved in during the late summer of 2008.

At the close of trading Dec. 2, the 20-stock index stood at 5,038, up 65.94 points on the trading day. The index has not seen these levels since Sept. 19, 2008, when it closed at 5,100.38. That was the last day, until today, that the index had risen above the 5,000 mark and remained there. Soon after, the financial crisis flared, leading to a nasty recession and a downward spiral in shipping. At its low in March 2009, the index was at 2,146.

Of the index's 20 components, 16 are companies that are mostly or exclusively involved in the movement of goods. The other four are airlines that generate most of their revenue from passenger traffic and move freight as a secondary function.

The index is considered a harbinger of economic cycles, the theory being that healthy shipping activity signals that businesses are confident enough about the future to order and manufacture more products. Conversely, a slowdown in shipping activity signals that businesses are less optimistic about future prospects and are tempering their ordering and production.

The index now stands about 400 points below its all-time high of 5,446.00, set in July 2007.