Dow falls on weak McDonald's earnings

The world's largest restaurant operator said it faced 'softening industry growth' in the latest quarter.
Traders work on the floor of the New York Stock Exchange in New York City on July 26, 2016.
Traders work on the floor of the New York Stock Exchange in New York City on July 26, 2016.PHOTO: REUTERS

NEW YORK (AFP) - The Dow finished in the red Tuesday (July 26), in part due to disappointing results from McDonald’s, as investors awaited a policy announcement by the US Federal Reserve.

McDonald’s shed 4.5 per cent as it reported a 9.1 per cent drop in second-quarter earnings US$1.09 billion (S$1.48 billion), due to a US$230 million charge from refranchising operations and tepid growth across its markets.

Analysts expect the Fed to keep US interest rates low when it makes its policy announcement on Wednesday. But many say the central bank could signal a greater likelihood of rate hikes later in the year.

The Dow Jones Industrial Average lost 0.1 per cent at 18,473.75.

The broad-based S&P 500 rose less than 0.1 per cent to 2,169.18, while the tech-rich Nasdaq Composite Index gained 0.2 per cent to 5,110.05.

McDonald’s fell the most among a heavy slate of Dow companies that reported earnings. Among other blue chips to release earnings, DuPont rose 0.4 per cent, 3M fell 1.1 per cent and Verizon shed 1.9 per cent.

Caterpillar, another Dow member, jumped 5.2 per cent after signaling it would cut more jobs in response to the sustained downturn in investment by oil and mining companies, while United Technologies advanced 3.1 per cent as it lifted its full-year forecast.

Under Armour tumbled 5.1 per cent as second-quarter net income fell 57 per cent to US$6.3 million, despite a 27.7 per cent rise in revenues to US$1 billion. Credit Suisse said the results underscored worries about profitability as the sports apparel company expands rapidly.

Gilead Sciences slumped 8.5 per cent after trimming its full-year forecast following a second-quarter drop in sales and net income. The biotech company’s results were hit by disappointing sales of its Harvoni medication to treat hepatitis C.

In non-earnings news, Netflix jumped 4.3 per cent on news it signed a deal with 20th Century Fox to be the global streaming home for the Emmy-nominated smash hit American Crime Story.