Markets fall while consumer confidence improves

Dow declined 244 (near session low), decliners over advancers about 2-1 & NAZ was up 89 (off earlier highs).  The MLP index slid fractionally to the 273s & the REIT index fell 2+ to the 363s.  Junk bond funds slid lower along with stocks & Treasuries ran into selling which raised yields.  Oil jumped 2+ to 80 & gold shot up 21 to 2356 (more on both below).

Dow Jones Industrials 

Nearly 6 months since McDonald's (MCD), a Dow stock & Dividend Aristocrat, opened its first CosMc's location, the hours-long drive-thru lines have died down, but the chain is just getting started.  The burger giant created the spinoff using one of its lesser-known McDonaldland mascots, CosMc, an alien who loves MCD's cheeseburgers.  While unveiling CosMc's at an investor event in Dec, CEO Chris Kempczinski said the company set out to create a brand that could sell customizable drinks & coffee popular in the PM segment to attract younger consumers.  The new brand rollout comes as beverages are increasingly “looked at now as part of that snack area — more affordable, indulgent & perhaps even a healthier treat,” said Katie Belflower, an editor at restaurant research firm Technomic.  “It’s a good profit margin for restaurants. With beverages, you can get really creative, without necessarily having the product lines that you would have to invest in with food.”  Since opening the initial location in the Chicago suburb of Bolingbrook, MCD's has opened 3 more CosMc's restaurants, all in Texas.  For now, the chain is planning to open 10 locations by the end of this year for a test run, with all but one located in the Lone Star State.  In another sign of the new brand’s expansion, it will launch its own mobile app & loyalty program, called CosMc's Club.  Customers can use the app to place orders that they pick up either inside the restaurant or in the drive-thru lane.  And loyalty program members earn 10 points for every $ they spend; once they rack up 400 points, they can redeem them for $2 rewards.  While the long-term fate of CosMc's is still too soon to tell, the gamble could pay off for MCD's even if the spinoff never makes it past the 10-location test phase.  The app & loyalty program will give the chain even more consumer insight.  The stock fell 4.56.

McDonald’s might never expand CosMc’s. But the spinoff could still pay dividends

Consumer confidence unexpectedly rose in May, ending 3 straight months of declines as Americans cheered a resilient labor market.  The latest index reading from the Conference Board was 102, above 97.5 in Apr & higher than had expected.  "Consumers’ assessment of current business conditions was slightly less positive than last month," Conference Board chief economist Dana Peterson said.  "However, the strong labor market continued to bolster consumers’ overall assessment of the present situation. Views of current labor market conditions improved in May, as fewer respondents said jobs were ‘hard to get.'"  Peterson added, "Fewer consumers expected deterioration in future business conditions, job availability, and income, resulting in an increase in the Expectation Index."  Just 13.5% of consumers said jobs were "hard to get," down from 15.5% in Apr.  Elevated prices remain a key sticking point for consumers & help explain why confidence hasn't fully rebounded.  Consumers cited prices, in particular those for food & groceries, as having "the greatest impact" on their view of the US economy.  The Conference Board's reading of 12-month inflation expectations ticked up to 5.4% from 5.3% the month prior.  This also came with a slight uptick in the percentage of consumers expecting higher interest rates over the next year.

Consumer confidence unexpectedly rebounds

When Starbucks (SBUX) & its baristas union resume contract bargaining this week, workers may have renewed momentum at their backs, courtesy of the company's own CEO.  The coffee giant last month found itself reporting an objectively challenging qtr.  US same-store sales fell 3% & traffic dropped 7% & the company cut its 2024 forecast.  CEO Laxman Narasimhan admitted SBUX was seeing a more cautious consumer when it came to spending, but also mentioned the need to make improvements to stores as the company saw troubling trends.  SBUX reported rates of incomplete mobile app orders in the mid-teens & said occasional customers came in less.  Narasimhan cited some of the challenges that union workers have been highlighting in their bid for better working conditions.  “Specifically in our U.S. stores, we’re focused on creating a more stable environment for partners through investments in equipment innovation, process improvements, staffing, scheduling and waste reduction, all things our partners value and prioritize creating a more satisfying work environment in our stores while de-risking our business,” Narasimhan said.  He added that throughput has improved & said the company's action plan will continue to build on that momentum with improvements to stores & better communication of value.  “We have improved speed of service quarter over quarter. If you look at the processes that we are rolling out, particularly around peak, what we are finding is that we have opportunities to improve that even further with changes in processes and tools that we provide to partners at peak,” Narasimhan said.  For Workers United, the union behind the SBUX organizing, his admission that more could be done was promising.  The stock fell 1.39.

Starbucks is set to resume union negotiations as it confronts issues at its stores

Gold prices gained, helped by a weaker $ as investors look forward to US inflation data due later this week for more clarity on interest rate cut timings.  Spot gold was up 0.3% at $2357 per ounce & US gold futures settled 0.9% higher at $2356.  The dollar index is down & the yield curve rated dropped a little bit.  Gold is coming off a correction & is hovering around resistance levels & now it's bouncing again.  The bulls continue to be fairly optimistic on gold.  Ambiguity of Federal Reserve monetary policy may very well keep gold from taking off & its moves may be very much data dependent.  The $ slipped to a more than 1 week low, making gold less expensive for other currency holders.  Focus this week will be on the US core personal consumption expenditures price index (PCE), the Fed's preferred inflation gauge, due on Fri.

Gold Moves Higher Midafternoon as the Dollar Weakens

West Texas Intermediate (WTI) crude oil closed higher on expectations the start of the US driving season will offer a boost to demand ahead of a weekend meeting of OPEC+ that is expected to keep supply restrictions in place.  WTI crude oil for Jul closed up $2.11 to settle at $79.83 per barrel, while Jul Brent crude, the global benchmark was last seen up 97¢ to $84.07.  The rise comes with the Memorial Day weekend start of the summer driving season, easing some concerns over weak demand amid high interest rates & rising US oil inventories.  OPEC+ will stage a virtual ministerial meeting over the weekend that is expected to end with a decision to roll 2.2-M barrels per day of voluntary production cuts slated to end on Jun 30 into the 3rd qtr as the cartel seeks to support prices.

WTI Crude Oil Closes Up 2.7% as The U.S. Driving Season Begins; OPEC+ is Expected to Keep Quota Cuts in Place

The bulls extended their long holiday, so the Dow was lower.  But the tech stocks on NAZ were still popular although early gains were trimmed in the PM.  Dow is already down 1200 from its record made 11 days ago & back to where it was in late Feb (on the way up).  The overbought rally looks to be tired.