As Rail Traffic Slows, Use Caution With CSX, Kansas City Southern

After U.S. GDP shrank 0.7% in the first quarter, RealMoney Pro contributor Chris Versace breaks down his read on the current state of the economy.

After U.S. GDP shrank 0.7% in the first quarter, RealMoney Pro contributor Chris Versace breaks down his read on the current state of the economy. Versace notes that there have been five consecutive months of monthly declines in industrial production, and explains that it's especially important to zero in on truck and rail traffic. In April, Versace reveals that rail traffic popped, but then significantly fell in May and has weakened even further so far in June. With weakening traffic and slowing demand for new equipment, Versace says that reads that the economy is not firing on all cylinders and we've already seen the snap-back that we're going to get from the weak first quarter. This means investors should think twice about owning rail companies like Kansas City Southern (KSU), Norfolk Southern (NSC) and CSX (CSX). Also, he expects a negative spillover effect onto companies like Trinity Industries (TRN), Greenbrier Companies (GBX), PACCAR (PCAR) and Navistar (NAV).