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The Dow Jones Industrial Average (INDEX: ^DJI ) fell last week for the first time this year. The U.S. Commerce Department put a damper on an otherwise strong week by releasing "disappointing" GDP figures.
Should investors care? Not really. The Dow dropped a modest 0.47% in five days of trading. Overall, the economy continues to improve with steady but perhaps unimpressive growth. Further, there was one sector that provided a reason for investors to rejoice: good old-fashioned industrials. Industrials appear poised to drive the Dow higher in 2012.
First and foremost, Caterpillar (NYSE: CAT ) released robust earnings that basically confirmed that its recent stock price run-up was more than justified. On Thursday, the head of investor relations at the equipment manufacturer pointed to the US as the key driver of growth. In his words, the domestic economy would enable Caterpillar to experience its "best growth since Harry Truman was president." For investors, that's a ringing endorsement from a company that expects sales to increase by 25% in the year ahead. So far in 2012, Caterpillar's share price has surged 22%.
Another industrial titan, although not a Dow component, reiterated this outlook for the U.S. economy. Eaton (NYSE: ETN ) , the manufacturer of equipment and components for trucks and aircraft, predicted that the U.S. market would grow faster than the rest of the world for the first time since the mid-2000s.
Staying in the aircraft sector, Boeing (NYSE: BA ) managed to beat all expectations for the fourth quarter of last year, as aircraft orders increased and margins grew wider. Investors showed some concern about defense budget cuts and a mediocre outlook for 2012, but Boeing followed up by announcing a megadeal with European carrier Norwegian Air Shuttle. Fresh off the heels of its largest deal ever with Southwest Airlines (NYSE: LUV ) , Boeing continues to boost its impressive backlog. The Norwegian deal led some to speculate that Boeing could eclipse Airbus as the world's largest aircraft manufacturer in the next 12 months. On the whole, it's a bright start for a company that was seen as struggling a year ago because of delays with its flagship 787 Dreamliner.
While the economy seems to be dragging its feet in some respects (see housing and consumer spending), the industrials sector is picking up steam. Investors should keep an eye on these industrial giants to see whether they will continue to outperform. In addition, our chief investment officer has identified seven outperformers to watch during earnings season. You'll find additional insight on these rock-solid companies in a brand-new special free report. It's completely free for our readers, so access yours today.