McDonald's Outperforms on a Downbeat Day


The Dow Jones Industrial Average is down due to fears over sequestration in the U.S. and potential economic turmoil in Europe ahead of an uncertain Italian election. As of 1:25 p.m. EST the Dow has lost 34 points, or 0.24%, while the S&P 500 is down 0.31%.

There were no U.S. economic releases today. In the U.S., fears have been rising regarding the $85 billion in automatic spending cuts set to go into effect on Friday, as there has been little news of any potential deal to address them. The only news so far is that the Senate will consider legislation later in the week that would avoid the cuts. President Obama and administration officials have been out warning of the disastrous effects of the cuts. These include delays at major U.S. airports, massive layoffs of educators and defense contractors, and a smudge on America's standing in the world. We'll have to wait and see whether the cuts take effect.

Economic fears are also rising in Europe, where Italian elections are taking place. Polls currently show that the Italian congress will be heavily divided between a center-left alliance led by Pier Luigi Bersani and a center-right alliance led by former Prime Minister Silvio Berlusconi. This has investors worried that Italy will not follow through on austerity measures, refreshing fears in the European debt markets.

Markets in Europe finished the day up, but that was before any results were available for the Italian elections. In the U.S., the market started the day strong but since slowed turn and turned negative.

Today's Dow leader
Today's Dow leader is McDonald's , up 0.9%. Because Europe makes up McDonald's largest geographic segment, it's a little surprising that the stock is up, given the negative news out of Europe and the fast-food chain's negative same-stores sales growth in the region. While the stock may be feeling starstruck following a shout-out from Oscar winner Jennifer Lawrence on the red carpet last night, the stock is more likely gaining as investors get in before the stock's dividend payout. McDonald's doles out nearly 70% of its free cash flow for a dividend yield of 3.2%.

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Dan Dzombak can be found on Twitter @DanDzombak or on his Facebook page, DanDzombak. The Motley Fool recommends McDonald's. The Motley Fool owns shares of McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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