Markets hesitate ahead of inflation data this week

Dow crawled up 22, advancers over decliners better than 2-1 & NAZ added 44.  The MLP index barely budged at 281 & the REIT index was up 1 to 371.  Junk bond funds were mixed & Treasuries had limited buying which lowered yields.  Oil traded up about 1 to the 79s & gold retreated 24 to 2350.

AMJ (Alerian MLP Index tracking fund)

Fewer homeowners have been taking on remodeling projects, reports show.  But don't mistake it for a slow market.  The Leading Indicator of Remodeling Activity (LIRA), an outlook measuring home improvement & repair spending on own & re-occupied homes, peaked at 17.3% in the 3rd qtr of 2022.  The LIRA has been declining since slid 1.2% in the first qtr of 2024 compared to the prior qtr.  The NAHB/Westlake Royal Remodeling Market Index (RMI) by the National Association of Home Builders (NAHB) reflects a similar decline.  The RMI, which measures remodelers’ sentiment about the market, peaked at 87 points in the third quarter of 2021, & like the LIRA, has been consistently declining since. In the first qtr of 2024, the measure fell to 66 points, down 1 point from the previous qtr.  However, the RMI is still in territory where more remodelers see the conditions as “good” rather than “poor,” said Robert Dietz, chief economist of NAHB.  In the group's first qtr report, NAHB Remodelers Chair Mike Pressgrove noted that “demand for remodeling remains solid, especially among customers who don’t need to finance their projects at current interest rates.”

Fewer homeowners are remodeling, but demand is still ‘solid’

McDonald's (MCD), a Dow stock & Dividend Aristocrat, working to introduce a value meal in US stores to help offset an increasingly challenging environment for consumers.  A $5 meal could include 4 items: a McChicken or McDouble, 4-piece chicken nuggets, fries & a drink.  The potential new offering comes at a time when low-income consumers are beginning to pull back on spending, particularly at fast-food brands.  Mentions of low-income consumers on company earnings calls are at their highest levels in nearly 2 years, according to data from Bank of America.  Execs from have all noted the restraint in spending.  MCD's recently reported a mixed first qtr, with US same-store sales slightly missing expectations.  Higher prices helped grow average checks, but some consumers pulled back as a result of the steeper costs.  “Consumers continue to be even more discriminating with every dollar that they spend as they faced elevated prices in their day-to-day spending, which is putting pressure on the [quick-service restaurant] industry,” CEO Chris Kempczinski said.  He added that MCD's has to be “laser-focused” on affordability to attract diners.  Kempczinski said the company is working on a national value deal in the US, & the company's CFO Ian Borden said the US leadership team was working closely with owner-operators in this environment.  The corp & franchisees, who run 95% of MCD's locations & weigh in on such offerings, are often at odds over promotions that could eat into owners’ profits.  The stock rose 44¢.

McDonald’s is working to introduce a $5 value meal

Asia-Pacific markets were largely lower as investors assessed China's stronger-than-expected Apr inflation data.  China's consumer price index climbed 0.3% year on year, beating estimates of a 0.2% rise.  The producer price index, however, fell 2.5% year on year, more than the estimated 2.3% drop.  The data highlight for the week will be Japan's first-qtr GDP, which is expected to have contracted an annualized 1.5%, to poll, likely jeopardizing the Bank of Japan's plans to raise interest rates.  India's inflation figures will also be out later today, with estimates expecting inflation in the world's 5th largest economy to slow slightly to 4.8% in Apr, down from Mar's 4.85%.  Japan's Nikkei 225 closed 0.1% lower at 38,179 & the broad-based Topix fell 0.2% to end at 2724.  South Korea's Kospi ended flat at 2727, while the small-cap Kosdaq fell 1.1% to close at 854.  The Australian S&P/ASX 200 closed flat at 7750 & Hong Kong's Hang Seng index rose 0.8%, while mainland China's CSI 300 index fell marginally to finish at 3664.  China's finance ministry said it would start sales of long-term special treasury bonds worth 1T yuan ($138B) this week.

Asia markets largely lower as investors assess China inflation data, await Japan GDP print

New inflation data this week will likely be key drivers for stocks.  Meanwhile interest rates linger at multi month highs.

Dow Jones Industrials