Restaurant Stocks Reflect U.S. Spending

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Restaurant Stocks Reflect U.S. Spending Doubt, Signaling Fed May Ease More...

Full-service chains owned by Darden Restaurants Inc. (DRI) andBrinker International Inc. (EAT) are underperforming as investors bet on a slowdown in dining out, a signal to the Federal Reserve to do more to bolster consumption.
“Both sectors are down, and this shows the stock market is concerned we’re either in for a double-dip recession or at least another slowdown,” Hooper said. “If the market is right, full- service restaurants, because they are more discretionary than quick-service, will take the brunt of weaker consumer spending.”

This is “a signal by investors to the Fed that additional monetary accommodation is needed to support the U.S. consumer,” said David Rosenberg, the chief economist at Gluskin Sheff & Associates in Toronto. With a deteriorating labor market deterring purchases, “investors are concerned that consumer frugality may take on a new head of steam, which helps explain why full-service eateries are falling out of favor now.”