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If you want to understand why prices for many things aren’t rising as fast as they were a couple years ago, a good place to start would be the drive-thru. 

That’s according to one of the officials at the Federal Reserve who sets the nation’s monetary policy to keep inflation under control. In a speech Wednesday, Tom Barkin, president of the Federal Reserve Bank of Richmond, said the habits of McDonald’s customers showed why inflation continues to fall.

 “Consumers are driving this drop,” Barkin said in remarks at an economic conference in Wilmington, North Carolina. “Frustrated by high prices, they have become increasingly price conscious.”

The annual inflation rate measured by the Consumer Price Index tumbled to 2.5% in August from its recent high of 9.1% in June 2022. Consumer spending, however, has slowed but not faltered.

“They’re still spending, but they’re choosing: trading down from beef to chicken, from sit-down restaurants to fast casual, from brand names to private label,” Barkin said. “They’re waiting for promotions: opting for the $5 value meal at McDonald’s or jumping on discounts at Target.”

“This is how it is supposed to work. The old saying is that the solution to high prices is high prices. And that’s what we are finally seeing. Their choices are pressuring price-setters to finally moderate price increases.”

Fast food restaurants, including McDonald’s, introduced value meals earlier this year in an attempt to win back customers fed up with high prices. Those companies evidently observed the same trend that Fed researchers did earlier this year—diners were rebelling at higher prices at some restaurants and would draw the line at paying $20 for a hamburger. 

Still, Barkin said he wasn’t ready to declare “victory” in the Fed’s battle against inflation. The Fed began raising its benchmark interest rate in March 2022 to counteract a surge of inflation that took hold as the pandemic receded. 

The Fed ultimately raised the federal funds rate to its highest since 2001 and kept it there for more than a year with the goal of slowing the economy and discouraging borrowing and spending to bring supply and demand back into balance. 

Now that that’s happened, the Fed is shifting its focus toward ensuring the economy doesn’t slow so much that unemployment spikes. That's why the Fed reduced its interest rate last month, the first cut in four years. 

Barkin said it was too soon to say “mission accomplished,” with inflation still above the Fed’s annual goal of a 2% growth and the labor market trajectory still in doubt.“Victory means different things to different people, and—while we have made real progress—there remains significant uncertainty on both inflation and employment.”

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Electric vehicles (EVs) gave a boost to General Motors (GM), but not so much to rival Ford Motor (F).

GM reported overall third-quarter U.S. sales declined 2% year-over-year to 659,601, but EV sales skyrocketed 60% to 32,095.

The EV boost was driven by its newly launched Chevrolet Equinox EV, which had 9,772 sales in its first full quarter on the market, and Chevrolet Blazer EV, which posted a jump to 7,998 sales from just 19 a year ago.

Rory Harvey, president of GM Global Markets, said the company's EV portfolio "is growing faster than the market because we have an all-electric vehicle for just about everybody, no matter what they like to drive."

By contrast, while Ford's overall U.S. sales were 0.7% higher at 504,039, it had just a 12% gain in EVs to 23,509. In the second quarter, Ford's EV sales had soared 61% to 23,957.

Sales growth was more than three times higher for Ford's hybrid models, with President of Ford Blue and Ford Customer Service Division Andrew Frick arguing that the company has "listened to customers to offer them vehicles with powertrains to meet their specific needs."

Ford is hoping to boost EV sales by offering buyers a free home charger and installation. 

General Motors shares were little changed Wednesday afternoon but have added about a quarter of their value this year. Shares of Ford Motor recently fell 2.5% and are down about 14% in 2024.

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Major U.S. indexes were little changed at midday Wednesday, as investors watch developments in the Middle East and the U.S. port strike. The Dow, S&P 500, and Nasdaq were all slightly lower.

Humana (HUM) was the worst-performing stock in the S&P 500 after a large share of the insurer's Medicare offerings were downgraded by the Centers for Medicare and Medicaid Services (CMS).

Shares of Nike (NKE) also fell, a day after the athletic apparel giant withdrew its full-year guidance and pushed back its investor day.

Tesla (TSLA) shares slipped after the electric vehicle maker reported more deliveries than analysts projected for the third quarter, but investors may have had higher expectations.

Conagra Brands (CAG) shares sank as the food maker with brands such as Duncan Hines and Slim Jim reported profit and sales that missed estimates as it faced a “challenging environment.” 

Lamb Weston Holdings (LW) shares climbed after frozen potato products company announced a major restructuring that includes closing a plant, production cuts, and layoffs.

Shares of Caesars Entertainment (CZR) gained as the hotel and casino operator said it would buy back half a billion dollars in stock after its current repurchase program ends.

Diamondback Energy (FANG) shares also rose as Barclays upgraded the stock, pointing to the benefits of the oil company’s $26 billion purchase of Endeavor Energy Resources. 

Oil futures climbed and gold prices declined. The yield on the 10-year Treasury note was higher. The U.S. dollar was up versus the euro, pound, and yen. Most major cryptocurrencies traded lower. 

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Shares of health insurance provider Humana (HUM) plunged to their lowest level since 2020 after a large share of its Medicare offerings were downgraded by the Centers for Medicare and Medicaid Services (CMS).

Roughly 25% of Humana members, about 1.6 million people, are currently enrolled in plans that have a 4-star or higher Medicare Advantage rating for 2025, according to preliminary data—a massive drop from 94% in 2024. 

Humana could take a substantial revenue hit if the preliminary data stands when CMS releases its official ratings later this month, as higher star ratings generate bonus payments for the insurers that offer them.

The company said it is "disappointed" with its performance and suggested there may be errors in the way the ratings were calculated. CMS star ratings review plan performance once a year on factors such as the number of annual screenings and preventive services offered, how long it takes to get an appointment, and complaint levels. 

“Humana is exploring all available options to mitigate the expected 2026 revenue headwind related to its 2025 Star ratings in the event its challenges to the results are unsuccessful,” the company said in a regulatory filing Wednesday, noting the changes are not expected to affect its outlook in 2024 or 2025. 

Those options could include suing CMS, as Elevance Health did successfully last year. The insurer was able to recover money that was at risk due to lower star ratings.

Humana shares tumbled more than 17% in intraday trading Wednesday, and have lost nearly half of their value since the start of the year.

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Cal-Maine Foods (CALM) shares hovered near their all-time high set yesterday as the largest U.S. producer and distributor of eggs reported higher prices sent revenue soaring.

The company's fiscal 2025 first-quarter sales skyrocketed 71% to $785.9 million, $120 million more than analysts surveyed by Visible Alpha had anticipated. Earnings per share (EPS) came in at $3.06, also above estimates.

The company set quarterly records for total dozens and specialty dozens sold. Total dozens sold rose 13.5% to 310.0 million, and sales of specialty dozens increased 20.1% to 110.0 million.

Chief Executive Officer (CEO) Sherman Miller said the results "reflect favorable demand for shell eggs during most of the quarter and significantly higher market prices compared with the first quarter last year." He noted that in addition, the outbreak of avian flu significantly cut into egg supplies.

Miller added that the company believes that "today's consumers are looking for affordable and nutritious protein options and that our shell eggs and egg products meet that need."

Cal-Maine has a variable dividend policy based on net income, and it announced that for the fourth quarter of fiscal 2024 investors would receive $1.02 for every share they own. That is $0.25 more than the company had predicted previously. 

Shares of Cal-Maine Foods, which touched a record $77.11 yesterday and were at $76.93 an hour after the opening bell Wednesday, have added a third of their value this year.

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The Federal Government has urged Nigerians in Lebanon to evacuate the country due to Israeli forces’ att@cks on Hezbollah and surrounding areas.

The Nigerians in Diaspora Commission, NIDCOM, made the call on Wednesday, October 2, in a statement signed by its spokesman, Abdur-Rahman Balogun.

NIDCOM said although information from the Nigerian community in Lebanon indicated that most Nigerians had relocated from the southern part and were relatively safe, “we hereby advise them to keep safe until the ceasefire is in place.”

“Worried by the att+cks on Hezbollah and other areas in Lebanon by the Israeli government, the Nigerians in Diaspora Commission (NIDCOM) is hereby advising Nigerians resident in Lebanon to consider moving out of the country now that commercial flights are still in operation.

Nigerians are equally advised to liaise with our Embassy in Lebanon for necessary guidance regarding their safety and rest assured that their welfare and safety is of utmost concern to President Bola Ahmed Tinubu,” the statement reads.

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