McDonald's Was a Big Weight on the Market

Stocks slip from all-time highs, but 'vibespansion' expected to continue
By Newser Editors and Wire Services
Posted Feb 5, 2024 3:52 PM CST
McDonald's Drops 3.8% After Weak Revenue Report
Traders work on the floor at the New York Stock Exchange in New York, Tuesday, Jan. 23, 2024.   (AP Photo/Seth Wenig)

Stocks slipped Monday following the latest evidence that the economy remains strong, which could delay the cuts to interest rates that Wall Street wants.

  • The S&P 500 fell 15.80 points, or 0.3%, from its all-time high to 4,942.81.
  • The Dow Jones Industrial Average fell 274.30 points, or 0.7%, to 38,380.12.
  • The Nasdaq composite fell 31.28 points, or 0.2%, to 15,597.6
McDonald's was a heavy weight, falling 3.8% after it reported weaker revenue than expected. Some of the sharpest action was in the bond market, where yields climbed after the chair of the Federal Reserve said again that cuts to interest rates are unlikely to begin in March, the AP reports.

Earnings season is near its midpoint, and roughly half the companies in the S&P 500 have reported their latest results, including most of the market's most influential. Estee Lauder jumped 12.1% after it reported better revenue and profit than analysts expected. Caterpillar, which is seen as a bellwether of global economic strength, rose 2% after its profit for the latest quarter topped forecasts. Air Products and Chemicals slumped 15.6% after it reported profit and revenue that fell short of analysts' expectations. Boeing fell 1.3% after the discovery of another problem in some of its 737 fuselages that may delay deliveries of about 50 aircraft.

The yield on the 10-year Treasury climbed to 4.16% from 4.09% late Friday and from less than 3.80% late last year. The jump accelerated after a report showed US services industries are growing more strongly than economists expected, led by health care and social assistance. Services businesses said they're optimistic about the economy, though they're still cautious because of inflation and other challenges, according to the Institute for Supply Management. Such signals of a solid economy could give more reason for the Fed to pause before cutting rates, because they could keep upward pressure on inflation. That hurts the stock market because interest rates are one of the main levers that set stock prices, with lower rates helping.

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But there's also an upside for stocks from the US economy's blasting through worries about an imminent recession. It should drive growth in profits for companies, which are the other lever that dictates where stock prices go over the long term. Confidence among US consumers has perked up recently. It's a turnaround from when sentiment was mired at a low level because of frustrations about high inflation. Such gloominess raised the threat of a "vibecession." "It's not clear what's going to disrupt the 'vibespansion,'" that's taken its place, "barring a risk event such as the escalation of fighting in the Middle East into a regional war," says Jason Draho, head of asset allocation Americas at UBS Global Wealth Management.

(More stock market stories.)

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