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What’s happening: Shares of McDonald’s Corporation gained on Monday after the company released results for its second quarter.
What happened: The fast-food giant reported weaker-than-expected sales and earnings for the recent quarter.
The stock surged after the company said its recently launched deal recorded sales above estimates.
How were the results: The Chicago, Illinois-based company reported a decline in sales for the second quarter.
Why it matters: Sticky inflation resulted in weak sales with lower-income customers making fewer visits to restaurants. This trend has forced several fast-food restaurants to focus on value meals to increase customer traffic.
McDonald’s launched a $5 meal deal in late June, which sold above projections. The company is looking to extend the deal beyond August and working with franchisees regarding the same.
McDonald’s saw weakness in its overall business amid a lower-than-expected rebound in China. The company’s overall net income declined 12% year-over-year to $2.02 billion during the second quarter.
Global comparable sales fell 1.0%, with weak comparable sales across all segments. US comparable sales declined 0.7%, versus a 10.3% surge in the year-ago period. Sales in international markets declined 1.1% amid weak sales in France.
Sales by company-owned and operated restaurants fell 1% year-over-year to $2.46 billion, while sales from franchised restaurants came in flat at $3.94 billion.
The company’s total operating costs and expenses rose 5% to $3.57 billion, while operating income fell 6% to $2.92 billion.
“We are confident that Accelerating the Arches is the right playbook for our business and as consumers are more discriminating with their spend, we are focused on the outstanding execution of delivering reliable, everyday value and accelerating strategic growth drivers like chicken and loyalty,” CEO Chris Kempczinski said during the earnings call.
How shares responded: McDonald’s shares climbed 3.7% to close at $261.42 on Monday, following the release of quarterly results. The stock has lost around 11% over the past six months.
What to watch: Investors will continue monitoring overall inflation, which is expected to significantly weigh on consumer visits to restaurants and impact overall sales ahead.
McDonald’s $5 meal deal will also remain in focus, with the extension of the offer.
Context: The EUR/USD forex pair fell on Monday as investors assessed the monetary policy outlook.
Details: During its July 18 meeting, the European Central Bank has kept its interest rates unchanged as was widely expected, after cutting rates from record highs during the previous month.
Investors expect the ECB to announce two more rate cuts this year and around five additional rate cuts by the end of 2025.
The US Federal Reserve is projected to keep interest rates unchanged at its policy meeting this week, while markets expect a reduction in rates in September. Data released on Friday showed the Fed’s preferred PCE price index coming in at 2.5% in June, below the previous month’s 2.6% reading.
Strength in the US dollar exerted pressure on the EUR/USD pair on Monday. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained more than 0.2% to 104.56 on Monday.
The EUR/USD forex pair fell around 0.3% to 1.0821 on Monday. The STOXX Europe 600 Index declined by 0.20% to settle at 511.79.
What to watch: Investors await the release of economic data on gross domestic product, economic sentiment indicator and consumer confidence indicator from the Eurozone today. The Eurozone’s GDP grew by 0.4% year-over-year in the first quarter and is expected to expand by 0.6% in the second quarter.
Analysts expect the economic sentiment indicator in the Eurozone to decline to 95.4 in July, from 95.9 in June, while consumer confidence indicator is expected to improve to 1.0, the prior month’s reading of -13.
Other Markets: US trading indices closed mixed on Monday, with the S&P 500 and Nasdaq 100 up by 0.08% and 0.19%, respectively, and the Dow Jones index down by 0.12%.
The US disclosed a new military aid worth $1.7 billion to help Ukraine in its ongoing war with Russia. The news sent the RUB/USD pair lower in forex trading this morning.
Australia’s private house approvals fell by 0.5% in June, versus a 1.9% gain in the prior period, exerting pressure on the AUD/USD forex pair.
Philippines’ producer prices declined 0.1% year-over-year in June, following a 0.8% decline in the prior month. The country recording producer deflation for the sixth straight month sent the PHP/USD pair lower in forex trading this morning.
Brazil’s nominal budget deficit widened to R$135.72 billion in June, from R$89.62 billion in the year-ago month. The latest reading also came in much worse than market expectations of a R$102.3 billion deficit, exerting pressure on the BRL/USD forex pair.
Japan’s unemployment rate came in at 2.5% in June, versus market expectations of 2.6%. However, the JPY/USD pair fell slightly in forex trading this morning.
France’s GDP growth rate and household consumption, Spain’s GDP growth rate, consumer price index, business confidence, Turkey’s economic confidence index, Germany’s GDP growth rate and inflation rate, Italy’s gross domestic product, Eurozone’s consumer confidence price trends over next 12 months, industry confidence indicator, selling price expectations and services sentiment indicator, Brazil’s price index IGP-M, producer prices and nonfarm payrolls, Mexico’s GDP, US Redbook index, S&P CoreLogic Case-Shiller 20-city home price index, FHFA house price index, number of job openings, number of job quits, Dallas Fed general business activity index, Dallas Fed services revenues index and API crude oil stocks change, as well as China’s foreign direct investment.
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