The Dow Jones Industrial Average (DJINDICES: ^DJI) rose on Friday despite a disappointing jobs report, or perhaps because of it. The Labor Department reported an increase of 245,000 nonfarm jobs in November, well below a forecast of 469,000 jobs from economists polled by Reuters.
The weakening labor market could put more pressure on Congress to pass significant stimulus legislation sooner rather than later. The increased odds of a stimulus package may be what’s driving the stock market higher on Friday.
Shares of Boeing (NYSE: BA) failed to rise with the Dow after the company cut 787 Dreamliner production and indicated that an equity raise could be coming. Meanwhile, McDonald’s (NYSE: MCD) stock was flat after the company reportedly rolled out a few changes that will push additional costs on its franchisees.
Boeing considers raising cash, cuts 787 Dreamliner production
Boeing snagged a big order for 75 737 MAX planes from Ryanair earlier this week, providing a vote of confidence in the troubled plane as it closes in on returning to the skies after a nearly two-year grounding. The order is also an indication that some airlines are positioning themselves for a post-pandemic world with pre-pandemic passenger volumes.
Getting through the dual crises of the 737 MAX grounding and the pandemic have cost Boeing dearly: The company had accumulated $61 billion of debt by the end of the third quarter, up from just under $25 billion one year ago. At a conference on Friday, Boeing CFO Greg Smith said that all options were on the table for paying down the debt, including an equity raise. “When it comes to capital deployment, it will be all about paying down that debt,” Smith said, as reported by Bloomberg.
While Boeing stock has slumped this year as the pandemic gutted demand for air travel, it has surged since bottoming out in March. The stock has risen about 150% from its 52-week low, and positive vaccine news has fueled a rally over the past few weeks.
Smith also said that Boeing will reduce the output of its 787 Dreamliner to five a month by mid-2021, down by one from the previous plan. The wide-body 787 is used for international travel, which has been decimated by the pandemic.
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With Boeing stock buoyed by the return of the 737 MAX and the positive vaccine news, now could be the time to raise cash by selling stock. Shares of Boeing were down about 1.8% by early Friday afternoon, undoing some of the gains from Thursday driven by the Ryanair news.
McDonald’s pushes more costs on franchisees
McDonald’s provided some financial support to its franchisees during the pandemic, but now it’s reportedly looking to push off some costs to restaurant owners. Citing an internal memo, Bloomberg reported on Friday that McDonald’s will end a $300 monthly subsidy related to Happy Meals as of Jan. 1, ask franchisees to contribute to its tuition program, and change the model for technology investments. That last change will temporarily cost franchisees an extra $423 per month starting in March.
“It’s our responsibility, as your franchisor, to ensure we invest our dollars where they will have the greatest impact to the system. To that end, we have made some difficult decisions that will enable us to achieve this objective,” read the memo, as reported by Bloomberg.
McDonald’s has largely recovered from the pandemic, at least in the United States. Comparable sales were down 2.2% globally in the third quarter, but they surged 4.6% domestically. The company’s breakfast business was the hardest hit during the early pandemic lockdowns as fewer people commuted to work, but comparable sales in the morning hours returned to growth in September.
Shares of McDonald’s were unchanged by early Friday afternoon. While these moves could boost the company’s bottom line at the expense of franchisees, they could also sour relations between McDonald’s and those who own and operate the restaurants.
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