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Slowdown at the Drive-Thru By Spencer Jakab

Futures indicate yet another gain for stocks following strong results Wednesday afternoon from Microsoft and Meta Platforms. It would be the eighth rise in a row following the selloff induced by "Liberation Day." Earnings after the closing bell from tech heavyweights Apple and Amazon and U.S. monthly jobs data tomorrow morning are the next big catalysts.

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This is a big week for U.S. economic data, but one of the juiciest nuggets won't come from the government or even a think tank. This morning's McDonald's results could give us superior insight into the U.S. consumer.

We learned yesterday that the economy contracted for the first time in three years . The data was distorted by a pre-tariff surge in imports, though. Meanwhile, tomorrow's jobs report, expected to show a slowdown in hiring but steady unemployment, also is backward-looking. Even Tuesday's abysmal consumer-confidence data from the Conference Board, which showed confidence falling for a fifth straight month , needs to be taken with a pinch of salt.

There's a difference between how Americans say they feel and what they actually do with their money. When they skip the fries with that burger, or bypass their favorite fast food joint entirely, it has tended to bode poorly for the larger U.S. economy.

The signs already weren't great during the first quarter. Data firm Placer.ai , which uses cellphone location data to monitor foot traffic, reported that U.S. visits to quick-serve restaurants fell by 1.6% year-over-year.

Chipotle Chief Executive Scott Boatwright said last week that the burrito chain "began to see an elevated level of uncertainty " in February in which "saving money because of concerns around the economy was the overwhelming reason consumers were reducing the frequency of restaurant visits."

Starbucks, which said Wednesday that it's holding the line on prices, also had a disappointing quarter . Comparable transactions at its U.S. stores fell 4% from a year earlier, and that was in comparison to a very weak report a year earlier.

Chipotle and Starbucks have a more affluent customer base than McDonald's, though. Domino's, a value option, lagged expectations yet struck an upbeat tone about the rest of the year. But the pizza chain's chief financial officer warned that could change amid a "challenging macro backdrop" and pressure on low-income consumers. It noted a shift to walk-in business, for example, as opposed to more expensive delivery-a sign of value-seeking behavior.

The golden arches are the gold standard for economic signals. It isn't just the biggest restaurant chain in the world but one whose reports tend to be less-noisy. Until a year ago, it had a nearly unblemished three-year record of beating analysts' quarterly consensus estimates. Expectations for the first quarter have already dropped from $2.89 per share this time last year to $2.66 recently, according to FactSet, so don't expect the results themselves to be the story.

But do expect candid commentary on how its lower-income customers are faring. Management told us a year ago that they were feeling pinched.

Shareholders in unrelated companies from dollar stores to car parts who failed to pay attention weren't lovin' it.

Stocks I'm Watching

Tesla : About a month ago, with Tesla's stock sinking and some investors irritated about Elon Musk's White House focus, Tesla's board got serious about looking for Musk's successor. Board members reached out to several executive search firms to work on a formal process for finding Tesla's next chief executive, The Wall Street Journal reported .

Apple : A federal judge blasted the company for failing to loosen access to its App Store and referred the company to the Justice Department for criminal contempt violations.

Microsoft : The software pioneer's shares jumped in after-hours trading after it posted strong quarterly results . Its projections for the June-ending quarter were also ahead of analysts' expectations.

Meta Platforms : The parent company of Facebook and Instagram p osted strong quarterly earnings after Wednesday's closing bell. It projected revenue would grow during the current quarter, allaying concern about the impact of tariffs on its business.

McDonald's and Eli Lilly are both set to report quarterly results before the opening bell.

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Home Builders Are Piling on Discounts

America's top house builders say tariffs will add anywhere from $5,000 to $15,000 to the price of a typical home. A weak start to the spring selling season shows first-time buyers have pulled back sharply even before they are asked to swallow that cost. Builders of homes are offering discounts.

What I'm Reading The rush to get goods to the U.S. ahead of President Trump's tariffs has already led to huge distortions in global trade patterns and economic data. Ironically, it widened the trade deficit President Trump is so focused on narrowing. ( WSJ [https://The rush to get goods to the U.S. ahead of President Trump's tariffs has already led to huge distortions in global trade patterns and economic data.]) China's economy shows signs of trade-war damage, with a drop in export orders and weak factory production. Economists are warning of job instability for millions of people and a potential recession. ( WSJ ) President Trump thinks trade wars are easy to win for one simple reason: Other countries will give the U.S. almost anything to preserve market access. Canada's election pokes a hole in that theory. ( WSJ ) Work weeks of 110 hours drove bankers at this boutique banking firm to the brink. Wall Street has been reckoning with its culture of long hours and failure of workplace guardrails since the death of two young bankers in the past year. ( WSJ ) How tail-risk ETFs use options to act as portfolio insurance and why they underperform the market in the long run. ( Morningstar ) This Day in Markets History

On this day in 1930, President Herbert Hoover, speaking at the annual dinner of the U.S. Chamber of Commerce, declared: "While the crash only took place six months ago, I am convinced we have now passed the worst and with continued unity of effort we shall rapidly recover." It wasn't so rapid.

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About Me

My name is Spencer Jakab and I've been musing about money and markets for more than 30 years, including editing The Wall Street Journal's Heard on the Street column for a decade, writing two investing books and running a team of stock analysts at a global investment bank.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

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May 01, 2025 06:22 ET (10:22 GMT)

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