The Dow Jones Industrials (DJINDICES: ^DJI ) managed to gain almost 21 points on Monday, taking only partial advantage of the favorable mood that sent the broader market up more dramatically. Even hard-hit small-cap stocks saw better gains Monday, rebounding despite ongoing concerns about whether the long bull market in the Dow and in the stock market generally is coming to an end. Financial stocks Goldman Sachs (NYSE: GS ) and JPMorgan Chase (NYSE: JPM ) were among the best performers in the Dow Jones Industrials today, but McDonald's (NYSE: MCD ) lost ground.
For the Dow's financial stocks, Monday was a reasonably good day, as Goldman Sachs rose 0.8% and JPMorgan Chase picked up 1%. Investors in both U.S. banks have to be pleased at the recent regulatory scrutiny that foreign banks have gotten over the past week, with criminal investigations and guilty pleas expected from one bank and the potential for others to become involved. Goldman Sachs CEO Lloyd Blankfein said last Friday that he thinks the adverse impact of a plea bargain from those foreign banks could require decisions to cut off or curtail existing credit relationships in order to protect clients.
More generally, though, banks remain in a relative sweet spot in the current market environment. Rates on the 10-year Treasury moved back above the 2.5% level Monday, but rates remain at a fair level that provides some interest margin over rock-bottom short-term rates but also leaves room for potential refinancing. That could start bringing back mortgage-refinancing activity in the case of JPMorgan Chase, and it could lead bond-underwriting clients at Goldman Sachs to race to lock in what could be one last set of low-rate opportunities before the end of quantitative easing from the Federal Reserve removes a key artificial depressant on interest rates.
Meanwhile, McDonald's fell more than 1% as investors continue to worry about the fast-food giant's ability to recover in a tough industry environment. McDonald's has made numerous efforts to try to keep up with the pace of innovation in fast food, with menu updates and new product offerings designed to refresh interest in the Golden Arches among its traditional customer base while also wooing new customers into the fold. Under pressure from franchisees under the company's franchise model, McDonald's is now looking at returning to some of the basic menu elements that gave it its success in the first place. Nevertheless, with competition growing fierce in restaurant world, McDonald's can't afford to wait long for its initiatives to bear fruit.
The Dow Jones Industrials didn't move much today, but investors should keep an eye on McDonald's as well as financials like JPMorgan and Goldman. Put together, these stocks give investors a good look at some of the most important trends influencing the Dow right now.
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