Stocks' Labor Pains, McDonald's Misses, Lilly's Weight-Loss Gains, Tesla Layoffs Talk 4/30/24

David Faber (0:00)

Market Insight and Analysis. You're listening to the opening bell of CNBC's Squawk on the Street.

Carl Quintanilla (0:05)

Good Tuesday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Jim Cramer, David Faber at Post 9 of the New York Stock Exchange. Closing out the month of April, first down month since October, and futures are weak as employment costs come in hot ahead of Friday's jobs number 10 year 467 Our roadmap begins with a flood of blue chip earnings to digest McDonald's, 3M, Coke, all on the move post results.

David Faber (0:27)

Another big name to watch is Eli Lilly. By Lilly, it is one of the top gainers, pre-market on the S&P posting that profit beat, hiking that full year guidance by $2 billion. And Elon Musk is reportedly going, quote, absolutely hardcore around headcount and cost reduction as Tesla plans for more layoffs.

Carl Quintanilla (0:45)

Let's begin with futures moving lower in reaction to this ECI data with the Fed kicking off its two day meeting today, Jim. For two year on year, maybe a little warm.

Jim Cramer (0:54)

Yeah, you know, we just don't have what we want in these numbers, which then allows the Wall Street Journal story this morning talking about how Powell feels very good about higher for longer.

I still think that March was weak and that you're not going to get a really strong number from April, but housing, shelter, that's bad. But there also is this overall tone, and we're going to get to it with McDonald's. They did a very good graphic on Squawk, which shows you how much of burger's going up.

And there's just this belief among people that there's no controlling this thing. Now, I think actually we do get control, but when you see that one of the stunning things is when Walmart got rid of 51 clinics because they can't make any money because people are too expensive. David, we're in a period where everyone just figures it's still going to be inflationary. That mental instinct about inflationary has not been broken. Hasn't been broken. That has to break.

David Faber (1:45)

What breaks it?

Jim Cramer (1:47)

A recognition that we, that companies can't offer what they're offering, that they have to lower prices to get customers to come in. So you get a thing. Let's take McDonald's, okay? So McDonald's misses, all right?

And most of the restaurants have been pretty good. But let's say McDonald's misses. Here's what has to happen.

David Faber (2:09)

Misses on earnings.

Jim Cramer (2:10)

Yeah. They have to go to their franchisees and say, hey, you know what, guys? We raised the price too much. I want a burger that's less money. Now, David, the franchisees do not want to take that hit.

But they're not in sync with what the CEO and the shareholders are in sync with. So you have to bite the bullet. I'm not calling for Marlboro on Friday here. I'm not calling for one of those where they just boom. But look at this. You can't charge that. The people who pay that don't have it, okay? So what they have to do is say, you know what? We're going to take the hit. We're going to cut our earnings. We're going to lower the price of our burgers.

The franchisees have to take the hit and then the stock comes back.

But you've got to lower the prices.

Carl Quintanilla (2:53)

Well, they're not talking about price cuts, but they are talking about larger burgers. That's one of the big things on the call this morning.

Jim Cramer (2:58)

Right, right. And they're trying because larger burgers are something that the franchisees can get behind. But this isn't era where if you don't offer rollback, like Walmart's rollback, like Costco's rollback some things, then you're just not going to get the numbers. McDonald's doesn't have the numbers. Now, Brinker has a higher price, and Kevin Hockman can afford to raise price, and he's been willing to lose lower-end customers because he makes a lot of money off, they're the largest margarita maker in the country. Right.

David Faber (3:31)

You know what the margins are on margaritas having owned a bar previously.

Jim Cramer (3:34)

No, David, not that good. They're about 97%.

Carl Quintanilla (3:38)

Really? You couldn't do a 4X on that?

Jim Cramer (3:40)

I tried to get them to 98% over and over and over again.

David Faber (3:44)

97%.

Jim Cramer (3:44)

Yeah, and beer, by the way, on Second Mile.

David Faber (3:46)

Yeah.

Jim Cramer (3:47)

We didn't give free beer.

We had $10 free on Second Mile. And then what happens is you have a good year, not quarter, year.