Paramount-Warner Deal Closes with $79B in Debt, Pepsi Cuts Its Outlook

Zaid Admani (0:00)

Public.com presents The Rundown. Your daily market update in 10 minutes. My name is Zaid Admani, and today is Thursday, October 8th. In today's episode, we'll tell you why the stock market is actually getting cheaper despite sitting near record highs. We'll also tell you why Pepsi is raising prices again, and the media company taking on debt as if they're a hyperscaler. Then stick around to the end of the show to find out why spending on Halloween continues to surge. We got a great show for you today.

Let's go.

Well, stocks took a breather on Wednesday with the S&P and NASDAQ both dropping about 0.2% from their record highs and putting an end to their mini win streak. The S&P had gone up for four days in a row, and the NASDAQ was up for five days. The bond market had a pretty wild day yesterday. At one point, the 10-year treasury yield climbed to above 5.36%, which was the highest level since 2002 But then the US Treasury held an auction to sell $39 billion of 10-year treasury bonds, and there was a healthy demand for those bonds. And after the auction yields dropped to around 5.28%. Now yields are still at 20-year highs. And on yesterday's show, I mentioned that the stock market was somewhat ignoring the higher yields, but that's actually not true. Stocks are feeling the pressure from the higher bond yields. The S&P 500 now trades at about 19.3 times expected earnings, which is down from the 22 times at the start of the year. So that means that investors are paying less for each dollar of expected profits than they were at the start of the year. And a likely reason for that is the higher bond yields, which makes stocks a less attractive investment. Many investors would rather invest in treasuries and get a guaranteed 5.3% instead of investing in the stock market. So the stock market isn't exactly ignoring the bond market. You just can't see it, because earnings have been so strong, mostly from a handful of big tech companies. And as long as the earnings growth continues to be strong, stocks could keep rallying. And if we ever get to a point where yields start pulling back, that could add another spark to the stock market. So the earnings growth is gonna be something to watch over the next few weeks as we get into earnings season. Not to mention we have a Fed meeting at the end of the month. We'll continue to stay on top of everything, so definitely get subscribed to the podcast if you haven't already and tune in every day to stay in the loop.

Let's run through some headlines. And we're starting with PepsiCo. PepsiCo reported earnings this morning and just like their bag of chips, it left you wanting more. On paper, the snack giant had solid numbers. Revenues rose 5.6% to $25.3 billion. And adjusted earnings came in at $2.34, both numbers beating estimates. But the problem is Pepsi also cut their earnings forecast for the year. They now expect earnings to grow just 2.5% to 3.5%, down from the 5% to 7% growth they previously expected. So sales are growing, but higher costs are putting pressure on the company's profits. When you dig into the report, the North America market continues to be the weak spot. Pepsi's beverage volumes dropped 2% and food volumes were flat. Meanwhile, the international market continues to grow. It now accounts for over 40% of the company's revenues. You know, Pepsi tried to win back market share and get a boost in growth earlier this year by cutting prices of some of their snacks like Lay's and Doritos chips, but that didn't seem to work according to the numbers. So now the company is planning to raise prices because their own costs keep climbing. Essentially, they're gonna try to charge as much as they can to the Lay's and Doritos super fans who'll buy a bag of chips no matter what the price is. In fact, some bags of chips are now over $7. You know, at this point, I just buy my kids the generic store brand chips because they can't tell the difference. Zooming out though, I think the bigger problem for PepsiCo might be that the taste for Americans are changing. You know, it could be because of the rise of GLP ones that Americans are just snacking less on things like chips and switching to things like protein and other healthier snacks. So I think PepsiCo will need to adopt if they want to regain market share. But to me as an investor, it's tough to invest in a company like PepsiCo at this point. I mean, the stock is already down 13% this year while the S&P has gone up 14%.