McDonald's says not to egg surcharges and plans $1 McMuffin promo. (0:16) New homes sales slump. (2:38) Amazon unveils Alexa+ with AI. (4:08)Show NotesWells Fargo says good time to buy communications - see their picksSuper Micro options bulls get windfallMoomoo is an advanced investing trading platform that integrates real-time and comprehensive data with no commission on options trading, stocks or ETFs. New users from Seeking Alpha can exclusively enjoy an 8.1% APY* account opening bonus, up to 15 free stocks, and up to $300 in cash rewards. Terms & Conditions apply, visit moomoo.com for more details.
Chapter 1: What is McDonald's strategy regarding egg prices?
Welcome to Seeking Alpha's Wall Street Lunch, our afternoon update on today's market action, news, and analysis. Good afternoon. Today is Wednesday, February 26th, and I'm your host, Kim Kahn. Our top story so far. Restaurants are scrambling to deal with high egg prices, but McDonald's is bucking the trend of passing on cost to customers.
McDonald's announced that it will not impose any surcharges when serving eggs as part of its meals. It will absorb the extra cost of higher egg prices, unlike competitors Waffle House and Denny's that have instituted egg surcharges. The most significant factor driving up egg prices is the ongoing outbreak of highly pathogenic avian influenza, also known as bird flu.
Chapter 2: How is bird flu affecting the egg supply chain?
The deadly strain of H5N1 has led to the culling of millions of chickens since 2022, severely impacting the egg supply chain. As of January 2025, more than 134 million birds have been affected in the United States, which has thrown the supply and demand balance out of whack. The avian bird flu is deadly to poultry, including chickens, ducks, and turkeys.
Notably, more than 1,500 total commercial and backyard flocks have tested positive for bird flu across all 50 states and Puerto Rico. When a flock tests positive, all birds must be culled to stop the spread. On the sunny side, though, McDonald's is also offering a new $1 McMuffin promotion on its app for National Egg McMuffin Day on March 2nd.
Chapter 3: What promotions is McDonald's offering to attract consumers?
The move is aimed at attracting lower- to middle-income consumers who have turned away from splurging on dining out due to high costs. Earlier this week, Denny's announced that some restaurants in the U.S. will temporarily add a surcharge to meals with eggs. The amount of the extra fee will vary by region and location.
Chapter 4: How are restaurant competitors responding to high egg prices?
The chain said, "...we do our best to plan ahead with our vendors on items like eggs to minimize the impact market volatility has on our costs and menu pricing." In today's trading, stocks are rebounding after the recent sell-off, and Nasdaq is leading the major averages. Chip stocks are leaning higher as investors brace for the big earnings report from Nvidia after the bell today.
Chapter 5: What is happening with the stock market today?
As you heard earlier in Wall Street Breakfast, Supermicrocomputer is surging, and that's helping momentum in tech stocks. The stock opened above $55 this session, and trading will be important to options players.
Looking at SMCI options data, the open interest on SMCI calls expiring Friday, February 28th, with a strike price of $50, is 16,332 contracts, with each contract representing 1,000 shares. The open interest on $55 calls is 14,716. If the stock trades above $60 this week, another 31,237 contracts would be in the money, the largest open interest position for February 28th calls.
All these contracts look like a good bet to expire worthless as a market close on Tuesday. Looking to the economy, new home sales dropped 10.5% month-on-month to a rate of 657,000 in January from 734,000 in December, revised from 698,000. That's lower than the 680,000 consensus. The median sales price on new houses sold in January 2025 was $446,300, up from $427,000 in December 2024.
Chapter 6: How are new home sales trending in January?
The average sales price of $510,000 declined from $513,600 in the previous month. Pantheon macroeconomist Oliver Allen says the glut of unsold new homes has been pushing down prices. We expect further slight declines in new home prices over the next few quarters, he said. Among active stocks, Jack in the Box is surging after handily beating on the bottom line in fiscal Q1.
Adjusted EPS of 192 was down 3 cents from a year ago, but beat the consensus estimate by 23 cents. Total sales were down 3.7% to $469.4 million, about in line. Interim CEO Lance Tucker said, "...the first quarter saw a good start to top-line performance and bottom-line earnings flow-through as we battled through a difficult industry-wide macro environment."
And Lowe's returned to comparable sales growth, with comps up 0.2% during the recent quarter, driven by high single-digit pro and online sales, strong holiday performance, and rebuilding efforts in the wake of recent hurricanes." That was partially offset by continued near-term pressure in DIY discretionary spending.
Gross margin came in at 32.9% of sales versus 32.8% consensus and 32.4% a year ago. In other news of note, Amazon showed off new products and services at its device event, including a new AI-powered version of Alexa.
Known as Alexa+, the new multimodal version of the Assistant is capable of doing tasks such as booking reservations, ordering concert tickets, texting babysitters, remembering smart home devices, and more. Panas Pane, SVP of Devices and Services, said, The re-architecture of all of Alexa has happened. We're pumped about it.
The new Alexa knows almost every instrument in your life, schedules smart home devices, entertainment, apps you use, and brings them together, he said, adding that compared to the previous version, Alexa Plus is smarter, more conversational, and personalized, while also integrating humor.
And in the Wall Street research corner, Wells Fargo said communication services remains a key component of its barbell strategy of comm services at 40%, financials at 40%, and consumer staples at 20%. Strategist Chris Harvey says the sector and many individual stocks are reaching or nearing key technical support levels.
As a result, we believe the non-fundamental sell-off has created an attractive opportunity to increase exposure to the communications names, he said. Among the top picks are AT&T, Fox, Netflix, and Meta. See all the picks in our story. And watch out for our special bonus podcast after the bell Wednesday as we dig into NVIDIA's earnings.
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