Stocks Slow as the Market Waits for Earnings

Restaurants Under Siege

Commodity prices and the rising costs of employment are taking a toll on restaurants. Profits are down, and it’s mostly the markets fault. The price of eggs and beef are up, and not every restaurant chain can make the change toward cheaper chicken and beef. And even if they can, labor prices are on the rise for cooks and servers nationwide. The cost of living is up, and it’s taking a toll on restaurants.

One of the reasons why restaurants are so hard-hit is their relative inability to make changes to their menu in order to reflect current commodities pricing.
Some fast casual chains can pull it off, notably McDonald’s (MCD) which only features their McRib sandwich when pork prices are favorable. But for the vast majority of chains, they’re stuck paying whatever the market requires.

You can see the effects of commodities pricing at restaurants like Applebee’s, which push their pork menu and back off on beef when market conditions aren’t favorable. but one thing they can’t do is back off on the amount that they pay cooks and servers, and those prices are rising fast. With talk of raising the minimum wage nationally, chains like Yum! Brands (YUM), which are already struggling in this economy, will have one more weight around their necks when it comes to remaining profitable.

Stocks Slow as the Market Waits for Earnings

It was a slow week for stocks as the markets took a breath and waited for the earnings reports to start coming out next week. Trading slowed to a crawl on Friday, as the market primes itself for the coming earnings report season to shake things up. It was a slow week anyway, but with Friday’s anemic trading numbers and flat returns, a slow week got even slower.

It almost seems like last quarter’s earnings reports just finished being released, but that’s because many service companies have to wait in order to get their final figures for the quarter. We’re looking ahead to tech and manufacturing, which will release their earnings reports starting early next week.

With the crisis overseas, this is expected to be another weak quarter for earnings, which could result in continued inaction by the Federal Reserve. They have hinted at the fact that they want to see a booming domestic economy and some stability overseas before they decide to raise rates this time around. Still, they’re running out of time for a rate raise this year, so that could back them into a corner.

Regardless, we’ll be paying close attention to the earnings reports that are released in this next week, if only because they’ll give us some sense of how bad the industrial economy has gotten since last quarter. Although oil prices are on the rise, heavy equipment manufacturers like Caterpillar (CAT) are still struggling.

Avon Products (AVP) Down 35% in September

Thanks to a mixture of a falling dollar and an ongoing SEC probe, shares of Avon Products (AVP) stock are down big. Avon has been struggling for awhile now, ever since China revalued their currency and the dollar has been week. They count on overseas sales for a lot of their product lines, and the economy in Asia has been famously struggling.

However, this new investigation by the SEC -- which everyone is still tight-lipped about -- could spell mounting trouble for the makeup manufacturer. The last thing they need right now is more problems, because international trade conditions are problem enough already. Shares of Avon are down 37.5% over the past month, and closed out the day on Friday at $4.14 per share.
Published on Oct 10, 2015
By Aaron Phillips
Aaron Phillips is a financial researcher and journalist based out of Michigan. He regularly writes the IG Daily and IG Weekly columns.

Copyrighted 2020. Content published with author's permission.

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