Markets struggle ahead of major tech earnings reports later this week

Dow dropped 142, decliners over advancers better than 3-2 & NAZ slid back 36.  The MLP index was off 2+ to the 288s & the REIT index inched up 1+ to 403.  Junk bond funds were mixed & Treasuries had a little buying which lowered yields (more below).  Oil fell 1+ to the high 75s (more below) & gold lost 3 to 2377.

Dow Jones Industrials 

McDonald's (MCD), a Dow stock & Dividend Aristocrat, saw a drop in sales for the first time in years as it struggled to draw in cash-strapped customers amid higher menu prices.  CEO Chris Kempczinski said that the company's system "sustained significant inflationary cost increases" between 20-40%, depending on the market, over the last several years.  "As we absorb these cost increases in partnership with our franchisees, we look for ways to protect restaurant profitability via productivity efforts and selective price increases," Kempczinski added.  "These price increases disrupted long-running value programs and led consumers to reconsider their buying habits."  Global sales fell 1% in the 2nd qtr, its first decline in 13 qtrs, compared with the estimate of a 0.5% rise.  To reverse the decline, fast food chains have launched several promotions in an attempt to boost customer traffic during persistent inflation.  MCD was set to extend its $5 meal offer into Aug at most US locations after its launch on Jun 25.  Even though consumers were more discriminating with their spend, MCD still kept its 2024 operating margin forecast unchanged in the mid-to-high 40% range.  More than ½ of the amount will be used to start new restaurants in the US & intl markets.  EPS was $2.97 on an adjusted basis in the 2nd qtr, missing expectations of $3.07.  The stock rose 9.89 (4%).

McDonald's posts weak quarterly results as higher fast food prices hurt demand

Crude oil futures fell as traders appeared unfazed by the risk of widening war between Israel & the Iran-backed militia Hezbollah.  A rocket fired from Lebanon killed 12 children in the Israel-occupied Golan Heights on Sat.  Israel has blamed Hezbollah for the attack & the militia has denied responsibility.  Israel's security cabinet has authorized Prime Minister Benjamin Netanyahu's gov to decide on how & when to respond to the rocket attack.  West Texas Intermediate Sep contract was $76.86 per barrel, down 30¢ (0.4%) & YTD US oil has gained 7.3%.  The Brent Sept contract was $80.80 per barrel, down 3¢ & YTD, the global benchmark is ahead 4.9%.  Middle East tensions pushed oil prices higher in the spring, but the market’s reaction to events in the region have been muted since then in the absence of an actual risk to oil supplies.  Analysts have warned that a war between Israel & Hezbollah could lead to a direct confrontation with OPEC member Iran, which backs the militia group.  Oil prices have pulled back recently on worries about the health of China’s economy.

Oil prices fall as traders unfazed by Israel-Hezbollah escalation

Treasury yields fell as investors awaited the release of key economic data & looked to the Federal Reserve's meeting scheduled for the week.  The yield on the 10-year Treasury was down by nearly 3 basis points at 4.173% & the 2-year Treasury yield was last at 4.385% after falling by less than 1 basis point.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Investors awaited the Federal Reserve's Jul meeting & key data from the labor market slated for the week.  Rates are widely expected to remain unchanged, but investors are hoping for clues about when rate cuts will begin & how many will take place this year.  They will therefore be closely watching any policy guidance released by the central bank & the post-meeting press conference with Fed Chair Jerome Powell.  Fed officials have in recent months repeatedly said that they were looking for more evidence that inflation is sustainably returning to the 2% target before cutting rates.  On the data front, JOLTs job opening figures are due tomorrow, followed by ADP's private payrolls report Wed & the Jul jobs report, which includes nonfarm payrolls & unemployment data, on Fri.  Investors will be looking at the data for hints about the state of the labor market, as this could also inform monetary policy expectations & decision-making.

Treasury yields fall as investors look to key data, Fed meeting in week ahead

Stocks opened with a modest gain, then sellers took stocks lower.  No move is expected at the Federal Reserve meeting on Wed, despite signs the US economy & inflation have hit a sweet spot.  Many see other reasons for the central bank to wait until Sep to act.