There are a handful of companies that set the tone for our feelings about the health -- or lack thereof -- of the U.S. and global economies. The bellwether companies clearly include heavy equipment maker Caterpillar (NYSE:CAT), along with worldwide delivery companies FedEx (NYSE:FDX) and United Parcel Service (NYSE:UPS), among others.

It's the global scope of these companies that makes us turn to them for economic readings. On Tuesday, Caterpillar told us about its third quarter, and it was a strange combination of bad and not-so-bad -- probably an apt description of our current economic status.

For the quarter, the company earned $404 million, or $0.64 a share, a 53% decline on the income line from last year's $868 million, or $1.39 a share. As you'd expect, the decline was due primarily to a reduction in volumes. On the positive side, however, Caterpillar benefited from cost reductions, a lower effective tax rate, and positive LIFO inventory benefits totaling $120 million, or $0.16 a share. At the same time, employment was reduced by more than 17,000 from the prior year.

During the company's conference call, management noted that “worldwide dealer machine sales were about half of the 2008 third-quarter level. Over the past year, we have seen an extraordinarily steep drop in demand in the industries we serve." For instance, sales in the United States to end-users were down 80% from their high point in the beginning of 2006. At the same time, engine sales were weak, as demand slackened and dealers also reduced inventories in the quarter.

Looking ahead, however, CEO Jim Owens observed, "We are seeing encouraging signs that indicate a recovery may be underway." For 2009, the company is now forecasting a profit range of $1.10 to $1.30 per share, versus a prior expectation of $0.40 to $1.50 -- a range my wife could drive a tank through. For 2010, management anticipates sales and revenues to improve by 10% to 25% from the midpoint of 2009 expectations.

And despite the mixed message, investors clearly liked what they heard on Tuesday, as they raised Caterpillar's share price by $1.76 amid a down market. We'll now await the results from such other industrial bellweathers as Dow Chemical (NYSE:DOW), 3M (NYSE:MMM), and Ingersoll-Rand (NYSE:IR) for a more complete economic pulse reading. In the meantime, Caterpillar continues to march upward, and to my thinking, it should be high on Fools' watch lists.     

Caterpillar has received a four-star rating among Motley Fool CAPS players. What are your thoughts on this upward-bound company?

Fool contributor David Lee Smith doesn't own shares in any of the companies named above. He welcomes your questions or comments. FedEx is a Motley Fool Stock Advisor pick. 3M is a Motley Fool Inside Value recommendation. United Parcel Service is a Motley Fool Income Investor selection. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy with a powerful engine.