• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Transportation

Case Against a Slowing Economy Even Harder to Make

Very hard to get behind industrial-related names here.
By CHRIS VERSACE
Aug 31, 2015 | 12:04 PM EDT
Stocks quotes in this article: CSX, NSC, UNP, TRN, GBX, ARII, GMT, PCAR, GE, HON

(This story was originally published as a Diary entry on Real Money Pro.)

This morning we had several regional economic/manufacturing reports that, when collected together, painted a picture of a slowing domestic economy with the top-line figures, but more so with the underlying order data.

Just a few weeks ago, there were those that saw the big miss with the August Empire Manufacturing Index, which came in at -14.9 vs. the expected 4.5, as a blip. Based on what we've received today and since the Empire report, it's increasingly hard to argue against a slowing economy.

I tend to look at weekly rail traffic figures and other indicators to assess the vector and velocity of the U.S. economy. Sadly, weekly rail traffic supports the slowing-economy view. The most recent data for the week ended Aug. 22, showed a 3.7% year-on-year drop in weekly rail traffic with declines in metallic ores and metals (down 15%), petroleum and petroleum products (down 12%) and coal (down 6.4%) -- no real surprise on those last two.

I always say one data point doesn't define a trend, but in this case if we trace the rail traffic data back over prior weeks we find year-on-year carload declines of 4.4% for the week ended Aug. 8 and 6.5% for the week ended Aug. 1. Not the direction that points to a pick-up from the now better-than-expected second-quarter 2015 GDP revision.

Falling rail traffic means less stuff getting to manufacturing facilities, distribution centers and so on. Hard to see a vibrant economy when stuff isn't moving around the country. Not good for railroads like CSX (CSX), Norfolk Southern (NSC), Union Pacific (UNP) and the like. It also means slack in the system, which is not good for new railcar demand for Trinity Industries (TRN), Greenbrier (GBX), American Railcar (ARII) and others as leasing companies like GATX (GMT) and the railroads slow net railcar additions.

Lastly, there is the overall tone of the manufacturing economy, which, if we aggregate all of the August activity in these regional reports, doesn't point to a pronounced rebound coming in September.

Very hard in my view to get behind industrial-related names here, like Paccar (PCAR), for example, as well as those like General Electric (GE), Honeywell (HON) and other global player that have exposure to a slowing U.S. and a contracting China. Yes, you buy cyclicals when things look ugly, but you should do so when things are ugly and have hit bottom. The first sign I tend to look for is a bottoming-out in backlog data and we haven't seen it yet.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Versace had no positions in any of the securities mentioned.

TAGS: Investing | U.S. Equity | Transportation | Economic Data | Economy | Stocks

More from Transportation

Southwest Airlines Upgraded But the Charts Didn't Get the Memo

Bruce Kamich
Jun 23, 2022 1:35 PM EDT

Let's take a look.

Will FedEx Deliver? Checking the Charts Ahead of Earnings

Bruce Kamich
Jun 23, 2022 12:17 PM EDT

Here's our plan.

Winnebago's Numbers Were Awesome: Here's How to Go Along for the Ride

Stephen Guilfoyle
Jun 22, 2022 11:00 AM EDT

Here's my trading strategy for investors right now.

Why It Costs $1B Per Year to Go Up Against Indonesia's GoTo Group

Alex Frew McMillan
Jun 22, 2022 6:30 AM EDT

It's not often you find a tech stock with defensive characteristics and a strong upside, but GoTo offers both.

FedEx Soars Sharply Higher But Is It an Uptrend?

Bruce Kamich
Jun 14, 2022 11:58 AM EDT

Here's what aggressive traders could do.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 12:10 AM EDT PAUL PRICE

    More Insider Buying in American Woodmark (AMWD)

    American Woodmark , which I've discussed here fr...
  • 08:55 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    The 10 personality traits of successful traders an...
  • 12:08 PM EDT STEPHEN GUILFOYLE

    Stocks Under $10

    As a Portfolio Name Agrees to a Merger, Here's Our...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login