NEW YORK Restaurant stocks continued a December rally into the New Year despite gloomy economic news that included an all-time low in consumer confidence readings and another large drop in home values.
The NRN Stock Index rose 10.4 percent in December, following declines of 10.3 percent in October and 5.1 percent in November. The NRN Index, which is market-cap weighted and includes all 61 publicly traded restaurant companies, still fell 18.4 percent for the year. The Dow Jones industrial average fell 32.7 percent for the year; the S&P 500 fell 37.6 percent.
“Near-term investor sentiment has shifted favorably and [restaurant] stocks have rebounded sharply from depressed levels,” said analyst Joe Buckley at Banc of America Securities LLC, referring to the December rally. Analysts have cautioned investors that a full rebound for the industry still is not expected until the second half of 2009. As an industry that typically recovers quickly from depressed levels during recessions, investors often take stock positions ahead of a turnaround in hopes of higher returns.
Last week, the NRN Stock Index followed the general market in ignoring weak economic data, and the first day of trading in 2009 posted an upswing fueled by optimistic investors. The index increased 2.6 percent on Jan. 2, while the Dow Jones and the S&P 500 rose 2.94 percent and 3.16 percent, respectively. On Friday, the Dow reversed its four-week losing streak and closed above 9,000 for the first time in nearly two months.
Macroeconomic news released last week included December’s Consumer Confidence Index, measured by The Conference Board, which fell to 38 in a 100-point scale. The result marked the lowest monthly reading since the index was created in 1967. The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households.
In addition, the Standard & Poor’s/Case-Shiller housing index, which tracks the price of a single-family home in 20 cities, fell by 18 percent in October, the latest month of data. The report, released Tuesday, shows that home prices began to deteriorate in May 2007, but that this latest monthly drop was the largest since the 20-city index was created in 2000.
This week, the first full week of trading in 2009, the market will no doubt watch data including the Labor Department’s December unemployment report, which is expected on Friday. According to reports, the unemployment rate is expected to have risen to 7 percent, from 6.7 percent in November. Other reports that are expected next week include the government’s weekly jobless claims report, November construction spending, auto sales reports, and retail sales results. Expected earnings reports from the restaurant industry this week include Sonic Corp. and Ruby Tuesday Inc.
