US stocks kicked off 2024’s second quarter on wobbly feet Monday.
The S&P 500 (^GSPC) fell 0.4%, while the Dow Jones Industrial Average (^DJI) fell 0.7%. The tech-heavy Nasdaq Composite (^IXIC) dipped 0.2%, erasing earlier session gains.
Wall Street has begun 2024 on a high note: The benchmark S&P 500 has set 22 fresh closing records so far this year as part of its best first quarter since 2019. Meanwhile, all three major averages have now risen for five straight months.
Markets were closed Friday, but the week’s data highlight — the Personal Consumption Expenditures price index — served to boost hopes of rate cuts this year. That index contains “core” PCE, the Fed’s preferred inflation gauge. The report showed core PCE rose 0.3% month over month, below economist expectations. Fed Chair Jerome Powell said Friday that the data was “along the lines” of what the Fed is looking for.
The data has given a boost to investor bets on a June rate cut. According to the CME FedWatch tool, around two-thirds of investors are pricing in a cut at the Fed’s June meeting, compared with about 55% last Thursday.
The highlight of Q2’s first week on the macroeconomic front is Friday’s jobs report, which will serve as another important signal to the Fed.
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This something to watch on McDonald’s
True story.
After burning 3,251 calories on Friday (did two, one-hour bootcamp training classes), I decided to reach for a rare fast-food treat. A McDonald’s (MCD) spicy chicken sandwich and a diet soda. I didn’t look at the price for the product on the menu board and I quickly tossed the receipt. But I do remember leaving there feeling the purchase was a lot for a chicken sandwich and a diet soda.
So a new McDonald’s note today from Bernstein analyst Danilo Gargiulo is well-timed.
Gargiulo’s point is that McDonald’s has been more aggressive the past year in raising prices to combat inflation. In turn, a trip to McDonald’s may no longer be affordable to lower income consumers and traffic could take a hit. This cohort’s go-to in a land of McDonald’s inflation: food-at-home.
How aggressive McDonald’s has been on price hikes is neatly captured in the below chart from Gargiulo.
Given the prices on these signature fast-food burgers, maybe a frozen dinner from Conagra (CAG; reports earnings later this week) is the better financial option for most!
The inflationary burger. (Bernstein) -
Cocoa rally persists, hits new high of $10,193
Cocoa (CC=F) futures rallied to new highs on Monday, hitting a record $10,193 per metric ton during trading.
The commodity rose above the $10,000 level last week. Prices have risen more than 250% over the past year.
Severe weather in West Africa and damaged crops have fueled cocoa’s massive rally. Analysts have also pointed to large daily prices swings, signaling speculative trading.
“What really needs to happen is the exchanges need to stem and curb the speculation happening in the market,” Blue Line Futures chief market strategist Phillip Streible told Yahoo Finance in a recent interview.
“You need to see a better crop over in West Africa, and you need to see some of that demand really come down. So its a combination of things that probably won’t resolve any time soon.”
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Beware of the semiconductor stocks in April?
A good chart on the semis from BTIG’s technical analyst Jonathan Krinsky is below. It shows how quickly the Philadelphia Semiconductor Index (SOX) has advanced in a relatively short period (compared to prior five-month periods).
Can the gains continue? The semi-bulls may have to contend with April seasonal vibes.
Krinsky noted that the SOX has been negative for 8 of the last 10 Aprils.
The SOX has gone wild in recent months. (BTIG) -
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