Chinese Meat Scandal at McDonald’s Pushes DJIA Lower

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The Dow Jones Industrial Average has traded lower all day since tumbling about 0.7% in mid-morning. The index got a downward push thanks to McDonald’s Corp. (NYSE: MCD) which has dropped 1.26% through mid-afternoon following the story out of China that one of the company’s meat suppliers was selling what official news agency Xinhua called “stale meat.”

Yum! Brands Inc. (NYSE: YUM), which owns and operates KFC and Pizza Hut restaurants, has also been hit by the scandal. An undercover report from China’s Dragon TV revealed that the Shanghai Husi Food Co. Ltd., a Chinese company owned by Illinois-based OSI Group Inc., used stale meat and mislabeling expiration dates.

McDonald’s has stopped using products from Shanghai Husi, and has sealed more than 4,500 boxes of beef, pork, and chicken. Yum’s Pizza Hut stores have sealed 500 boxes of beef products from the supplier.

The reporter who broke the story told Xinhua that “stale meat was witnessed to have been added to products supplied to several fast food chains and expiration dates extended for some products.” Government inspectors had recently conducted one of its semi-annual reviews of the plant and found no problems according to the news agency.

McDonald’s shares have not fallen as far as shares of General Electric Co. (NYSE: GE), but at a share price of around $98 compared with GE’s price at around $26, McDonald’s carries about 4.5-times the weight of GE in the price-weighted DJIA.

About an hour before Monday’s closing bell McDonald’s shares are down 1.3% at $97.70 in a 52-week range of $92.22 to $103.78.

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