Market briefing---Matt (slow)
Mad Cow Case---Carmen (fast)
NYSE ---Deb (fast)
$2 billion of u.s. beef this year but say they’ll ban the meat if the case is confirmed. carmen roberts has been tracking the story throughout the day and has the latest.
thank you. the u.s. government is telling people there’s no danger to the food supply because the disease is not affecting the parts of the cow that were shipped out but the news is affecting attitudes. mcdonald’s stock has lost nearly $2 billion in market value from this news. and the case is not even confirmed. peter sorrentino, managing $2.6 billion at bartlett and company, sees the price drop as an overreaction. however, typical of other food scare such as with apples and previous cases of mad cow in the u.k. and canada. other asset managers sees the mcdonald’s price drop as a buying opportunity but soren sorrentino says the restaurant chain was nearly fully valued before the news and he’ll use the rebound as an exit exit point. he feels wendy’s and brinker international offers better buying opportunities.
we view it as a buying opportunity in casual dining with a broader menu selection where customers will continue to dine out but will choose poultry or fish items as opposed to beef.
beef prices fell on the news of the mad cow discovery. cattle futures fell as much as they’re allowed in one session, dropping 1.7%. sorrentino says that won’t help mcdonald’s in the near term.
mcdonald’s contracts their beef in advance so the way beef has been rising this year, from what we’ve seen, my guess is their current supply is already laid out so in the short run it doesn’t give them a great deal of benefit but creates the possibility of shifting consumer preference to other fast food or casual dining formats.
several restaurants, including wendy’s and sonic, issued statements saying their food supply is not affected by the incident. mcdonald’s said, “this situation has absolutely no connection whatsoever to mcdonald’s or our suppliers.” soren sorrentino personally owns shares of mcdonald’s and wendy’s.
jack in the box saying they’re not affiliated with suspected processors. also on this topic, we’ve been telling you you about concerns regarding mad cow disease in the u.s. looking at how stocks fared today in light of these developments. there’s the steakhouse stocks . outback down $2. smith & wollensky, lone star and rare hospitality all trading lower here today and there’s o’charley’s and ryan’s and steak n shake rounding out the group there so a broad-based selloff for steakhouses and the guys that actually package or process meat products, tyson, a diversified play. tyson is a leading processor of chicken and pork, but clearly under pressure today. smithfield, conagra, performance foods and sysco bucking the down trend there. chicken and pork processors, investment grade municipal, standard son and hormel on the rise. and this is an interesting play, , a $10 move with bio-rad, upgraded also today at beard. paradigm, orchid biosciences, serono, the french biotech and pharmaceutical company and surebeam rising today. u.s. beef industry is expected to face billions of dollars in losses on the mad cow news. japan, the largest importer of u.s. beef and at least six other countries have suspended imports. cattle futures fell the maximum, 1.7, the daily limit. $89.175 was the actual closing price we had there. they fell past the 1.5% limit. the mercantile has announced they are doubling this daily limit amount starting when we resume trade again on friday. looking at how other related futures reacted to the news, you see hog futures down 3.5% today. soybeans, which account for 1/3 of animal feed or supplies that make animal feed, on the rise, up not quite 2.5% today. other numbers on a quiet day of trading saw the dow, s&p and nasdaq all trading lower, .2% to .3%. new york stock exchange volume, second slowest day of the year, 517 million shares traded, about 1/3 of what we might typically see on a full day of trade. nasdaq volume also light, 643 million shares. there’s the wilshire 5000, down .2%. bonds on the rise today ever so slightly. the yield down a little bit after yesterday’s decline and then currencies, we saw new high yet again for the euro at $124.-- $1.2454. across the board declines for the dollar. and our top story, mad cow, a costly cow. it was only one cow, mind you and deborah kostroun accounting for the cost of that cow.
the total take, $3.4 billion, the impact we saw on wall street today. one cow weighs about 1200 pounds, returning to my farm days. looking at $3.4 billion in market cap wiped out when you add up the mcdonald’s, wendy’s. mcdonald’s losing $1.7 billion. tyson market cap falls $271 million. you also had processors lower in today’s session. moving to other news of the day, volume, as expected, the second slowest day of the year. that slowest day of the year was the day after thanksgiving so not much of a surprise with the markets closing early today and will be closing at 1:00 again on friday. the dow snapping that six-day winning streak, down 36 points. other stories we were following today, micron, the second most actively traded stock behind mcdonald’s. micron had their first quarterly profit in three years and sales up 62%, helping out semiconductors. retail, what we’ve been seeing in retail for the past month, the retail index was down again today, over the past month, since the day after thanksgiving, that index down 4%. that really not a good measure of what we’re looking at with consumer spending. retail stocks lower on the day. wal-mart, a drag on the market. wal-mart telling us recently that their sales coming in at the low end of expectations. energy stocks , that was the big winner in the session today. one of the biggest gainers in the s&p 500, as you can see, up .7%. crude oil up almost $1 today, helping out many oil stocks as we had crude oil close to $33 a barrel. last week we saw that really big high in the crude oil, it was about $34 a barrel. a lot of concern recently about crude oil inventories, that they may be depleted compared to a year ago. we do see weekly changes but year-over-year numbers concerning.% economic reports left a sour taste in many people’s mouths on wall street because you you had the new home sales and durable goods orders unexpectedly fell in november. durable goods, what we did see, some of the capital goods were lower. whirlpool, maytag, boeing, and the other companies that make goods that last for three years. i was talking with jim maguire with labranche specialists and he said if this was a full day of trading with more traders in the market, we could have seen a little bit more reaction out of that durable goods orders and also with the home sales coming in at the slowest pace since may. homebuilders, some of the biggest drags on the market, sharply lower.
i don’t always equate tupperware with a boeing jet as far as durable goods but she is right, they are both in that category. that economic news deb spoke about has reinforced the notion that the fed won’t need to raise interest rates next year. john poole, fixed income manager, talking to us next.
