Starbucks Stock Is ‘The Ultimate Strong Economy’ Signal — And It’s Tanking

American consumers are cutting back on their spending dollars, and a decline in Starbucks shares portends a difficult future for the markets.


Starbucks (SBUX) is the ultimate ‘strong economy’ (indicator),” Dan Fitzpatrick, founder of StockMarketMentor.com, told Investor’s Business Daily’s “Investing with IBD” podcast. “I think the economy is really weak for a lot of different reasons, but my latest product is Starbucks. “

Audio version of the podcast episode

Shares of the coffee chain came under fire after it reported a loss in earnings and sales during its second-quarter report on Tuesday. Starbucks stock fell nearly 16% on Wednesday to its lowest price in nearly four years. Wednesday also saw the largest volume for Starbucks stock in many years, according to Marketsorg data.

“Our performance this quarter was disappointing and did not meet our expectations,” said Laxman Narasimhan, Starbucks CEO. He made the comment on the company’s earnings call on Tuesday. “In a number of key markets, we continue to feel the impact of a more cautious consumer…the deteriorating economic outlook has impacted customer traffic, an impact felt widely across the industry.”

Meanwhile, Starbucks stock currently carries a Composite Rating of 38, According to IBD research, It ranks 32nd within the retail restaurant group. Fast casual chains reward (reward) And Chipotle (CMG) currently leads the group.

Starbucks shares as a leader

Fitzpatrick says the move in blue-chip stocks like Starbucks could signal what’s to come for the broader economy.

“If people didn’t frequent Starbucks as much, even if they were doing it four days a week instead of five, you would see a chart like this,” Fitzpatrick said. “Individual stocks can tell you a lot.”

Starbucks has long been viewed by the Street as a leader in consumer sentiment in the United States. People consider expensive coffee drinks a discretionary household expense, and consumers reduce their purchases or stop purchasing altogether if necessary. In a strong economy, consumers with excess cash will buy more Starbucks offerings. In addition, they will also hold back on spending in lean times.

Why watch breakouts?

Fitzpatrick says Starbucks stock is typical of why it’s important to view breakouts as bellwether stocks. “You have to focus on breakouts all the time, even if you don’t buy when breakouts are successful — that’s a sign of a strong market,” he said.

“Over the last few months, the hacks have been working really well,” Fitzpatrick said. “But when the breakouts stop working, you don’t even have to look at the S&P or Nasdaq to know this is a weak market.”

Watch this week’s podcast featuring Dan Fitzpatrick to learn how to listen to the market through individual positions.

Follow Mike Guang on XV @Maekjuang News And on the topics in @namedvillage.

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