Consumers switching to lower-priced chicken is illustrative of a parallel trend going on across Corporate America, because companies cannot grow the top line, they are desperately searching for ways to save money to boost the bottom line.
Restaurants are not the only companies that are seeing sensitivity to prices. FedEx noted lower international revenues because shippers were looking for lower-cost ways to ship.
And here's an illustrative story: Last week, Regal Benoit, which makes electric motors, particularly for heating ventilation and air conditioning (HVAC) companies, said that one of its large customers for motors decided to stop production of certain compressor platform and instead will source compressors from a third party .... so it won't be purchasing those motors from Regal. The company cited "the demand for more value-oriented products" as a headwind.
In this case, its customer (a large manufacturer of HVAC products) is simply going to a cheaper third party.
There are many stories about companies seeking to extend the life of their equipment ... so instead of, say, a 10-year replacement cycle for air conditioning systems, companies hope they can get, say, 12 years.
Last week, Alcoa's stock rose ... selling more aluminum. Nah. Alcoa is considering production cuts because some smelters are much more expensive to operate ... those in Europe. See? Cost-cutting.
1) Sysco, which provides supplies to restaurants, also came in lower than expected on the top line, noting: "Sales and operating earnings were negatively impacted by economic and weather-related headwinds, which dampened consumers' willingness to spend on meals away from home."
But Sysco has another problem: its stock price. The mania for defensive stocks has driven Sysco to multi-year highs with no real earnings growth. Cantor downgraded the stock last week for precisely this reason.
2) S&P 2000 anyone? Laszlo Birinyi upped his S&P 500 target this year to 1,900, now that it's passed his original 1,600 target. But Laszlo picked up on what I said last week—that the market's best friend right now (beside the Federal Reserve) is that no one believes the rally is real.
—By CNBC's Bob Pisani