With Thanksgiving on Thursday and people across the U.S. traveling for family dinners, S&P 500 restaurant stocks McDonald's and Chipotle Mexican Grill along with several other industry plays are showing strength in the current market rally.
The 53 stocks in the IBD-tracked Retail-Restaurants industry group have collectively advanced around 23% in 2023 with McDonald's stock, Chipotle stock, Texas Roadhouse and Wingstop all jumping higher this month after earnings. Meanwhile, Darden Restaurants has also formed a valid base and Jack In The Box reports fiscal fourth-quarter earnings and revenue late Tuesday.
The Consumer Price Index (CPI) was flat in October vs. September, signaling inflation may be cooling, although the gauge was still up 3.2% from a year ago, according to last week's report. Both were below expectations, sparking a market rally.
On Nov. 10, Morgan Stanley analyst Brian Harbour wrote in a research note that chain restaurants should see slight growth in the next year with fewer planned locations closures, less inflation and an easier staffing environment as the industry continues to recover from Covid shutdowns.
However, the analyst added that slower sales and rising labor costs are among potential difficulties for the industry heading into 2024.
"Higher interest rates, cost inflation, economic uncertainty, traffic challenges and persistent construction/permitting delays remain hurdles," Harbour wrote.
S&P 500: Restaurant Stocks
McDonald's stock gained 1.2% to 278.96 Monday while fellow S&P 500 component CMG also advanced 1.2% to 2188.01 during market action.
MCD closed on Friday down 0.1% to 275.75. The S&P 500 giant is up more than 5% in November, climbing the right side of a possible cup base.
Much of the stock's current consolidation formed below its 200-day moving average. Shares appear headed for a test of resistance at that level, closing a little more than 1% below that mark on Friday.
Chipotle stock has also formed a cup base with a 2175.01 entry, according to MarketSmith analysis. The S&P 500 component gained than 11% this month, capping a five-week rally.
Meanwhile, Wingstop shares have soared nearly 26% for November after earnings. That stock has advanced in seven consecutive sessions. WING broke out above a 223.77 buy point on Nov. 15 and is currently around 4% above that entry.
Fellow restaurant stock Texas Roadhouse stock edged 1% lower Monday after advancing 9% so far in November. TXRH, like its S&P 500 rivals, is in a cup base and has a 118.16 entry. Darden Restaurants stock hit a low of 133.36 on Oct. 13 but has been advancing this month, jumping more than 7%. DRI has now also forged a cup base but is around 11% below a 173.06 buy point.
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