This week is slow in terms of scheduled news events, but that doesn't mean you should put your head in the sand.
Granted, the market's reversal on Monday was riveting stuff. All it took was some sexy musings by a Fed governor close to Janet Yellen and BOOM, there came the stock rally. The market's exuberance on Monday reminded investors what a "data dependent" Fed means -- one that could change its mind on policy amid a single (good or bad) read on the economy. And as long as that's the Fed's approach, which is rooted on not being truly forward looking and seeking to pop asset bubbles, one should expect the volatility in the markets on comments from Fed officials to persist. So ridiculous.
Nevertheless, I am already planning coverage for late April and May this week because things are so slow. Here are three items I think could become news events in the coming weeks.
Dairy Prices Are Becoming More Affordable
Attention, all shoppers at Wal-Mart (WMT), Target (TGT), Kroger (KR) and Whole Foods (WFM) -- prices for dairy products are on the wane. According to the latest PPI report, dairy product prices fell 3% in February month on month, following a 5.7% drop in January. That is already popping up favorably in the business of Domino's Pizza (DPZ). I think it should help the company, the broader fast-food industry and cushion the impact of minimum wage inflation. It could also benefit the likes of General Mills (GIS), which makes yogurt (and seeing improved sales in its Yoplait business of late).
Expect analysts to start mentioning falling dairy prices as an earnings tailwind to some of these food companies ahead of earnings.
Is McDonald's Turning the Corner?
The struggles at the Golden Arches the past year have been well-documented. So there is no need to dig them back up. However, on Monday the company introduced the "Spirit of Kentucky" burger in select markets. A McDonald's (MCD) spokeswoman shared with me that this burger, which has bourbon-flavored sauce, was inspired by regional suppliers. In other words, no national rollout yet. But, the latest caloric bomb hints (emphasize hints) that McDonald's is allowing franchisees a bit more autonomy to create based on local preferences. If you are a McDonald's investor watching the likes of Shake Shack (SHAK) and Sonic (SONC) create new items people in their surrounding markets are craving, you have got to be encouraged by signs of innovation life from the world's largest fast-food company.
Now breakfast, which represents about 25% of McDonald's business and is a relative bright spot in the past year, is another story. I believe McDonald's is under siege right now from Yum Brands' (YUM) Taco Bell -- the chain has uncorked a series of creative marketing campaigns in recent weeks to highlight its unique breakfast offerings, mostly consisting of octagonal-shaped wraps. McDonald's could show some sales softening in breakfast when March sales are released due to Taco Bell's tactics.
General Growth Properties Sheds Light on the True State of Sears
On Friday evening, a General Growth Properties (GGP) spokesman pointed out to me in an email that of Sears' (SHLD) 12 locations the mall developer was buying, nine were in "A" rated malls -- usually the top malls in terms of surrounding demographics. General Growth will have its earnings call later this month, at which time it plans to share insights into redevelopment actions for the Sears sites.
The story, in my view, will be that Sears is in such dire financial shape it has to exit very sound malls, in the process allowing new competitors to enter its dwindling turf. I think international-based clothing retailer Primark, which inked a deal recently to lease space from Sears, is a serious threat to Sears and the entire mall. You will start hearing more about Primark real soon, so best start reading up on the company.
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