McDonald’s E. Coli Crisis Sparks 7% Stock Drop, Pressuring Dow Futures

Stocks Slide Ahead of U.S. Market Open Amid Key Corporate Struggles

U.S. stock futures are under pressure ahead of Wednesday’s opening bell, following the S&P 500’s back-to-back losses. Investor sentiment remains cautious, with several corporate giants reporting negative developments that are weighing on the markets. Notably, McDonald’s, Starbucks, and Qualcomm are facing significant challenges, leading to declines in after-hours and pre-market trading.

McDonald’s Hit by E. Coli Outbreak

McDonald’s shares plummeted nearly 7% in after-hours trading after the U.S. Centers for Disease Control and Prevention (CDC) linked an E. coli outbreak to the fast-food giant’s Quarter Pounder burgers. The outbreak, which spans 10 states, has resulted in 49 reported cases, including 10 hospitalizations and one fatality. The CDC cautioned that actual case numbers are likely higher due to underreporting.

In response, McDonald’s has removed slivered onions, a suspected source of contamination, from its supply chain in several Western states. Quarter Pounder hamburgers will also be temporarily unavailable in affected areas, including Colorado and Utah. While McDonald’s has assured the public that other popular beef items like the Big Mac remain unaffected, the negative headlines could dent consumer confidence and sales in the near term.

Starbucks Tumbles on Weak Sales and Suspended Outlook

Starbucks saw its shares fall more than 4% in extended trading after releasing preliminary results showing a 3% drop in quarterly sales, with same-store sales in the U.S. and China, its two largest markets, down 6% and 14%, respectively. The coffee giant is grappling with weakening demand in North America and growing competition in China, particularly from local brands like Luckin Coffee.

CEO Brian Niccol has outlined a “Back to Starbucks” plan aimed at revitalizing the business, focusing on simplifying the menu and improving customer service. However, with the company suspending its fiscal 2025 outlook amid an ongoing leadership transition, investor uncertainty is likely to persist.

Qualcomm Faces Licensing Threat From Arm

In the tech sector, Qualcomm shares dropped nearly 5% pre-market following a Bloomberg report that Arm, the British chip designer, is threatening to terminate a key licensing agreement. This license allows Qualcomm to design chips based on Arm’s architecture, a crucial aspect of Qualcomm’s business model.

While Qualcomm has yet to comment on the report, losing this license could severely impact its ability to design next-generation chips, especially at a time when competition in the semiconductor industry is intensifying.

TSMC Denies U.S. Probe Over Huawei Chips

Taiwan Semiconductor Manufacturing Company (TSMC) shares dipped 1.4% following reports suggesting that the U.S. is probing its relationship with Huawei. TSMC has denied the allegations, reiterating its compliance with U.S. export controls. However, concerns remain high as scrutiny over Huawei’s access to advanced technology grows, potentially straining TSMC’s operations.

Pre-Opening Outlook

With key corporate names facing significant headwinds, U.S. markets are poised for a cautious open. McDonald’s and Starbucks, two consumer-facing giants, are likely to weigh heavily on investor sentiment, especially in light of the public health crisis and weakening consumer demand. Qualcomm’s licensing issues add further risk to the tech sector, which has been a major driver of market gains in recent years.

Overall, the market appears bearish heading into the session, with traders likely to remain defensive as they digest these developments.