Wall Street Breakfast Podcast: PepsiCo Leads Beverage Stock Decline

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PepsiCo (PEP) leads slump in beverage stocks ahead of earnings season. (00:26) Exxon (XOM) close to buying Pioneer Natural (PXD) for about $60B - WSJ. (01:58) Amazon (AMZN) lets go employees across divisions. (02:54)

This is an abridged transcript of the podcast.

Beverage stocks traded weak on Thursday with a myriad of factors believed to be impacting sentiment.

Goldman Sachs says the biggest factor is probably the start of earnings season next week, with PepsiCo (NASDAQ:PEP) heading into the earnings conference on October 10.

Analyst Bonnie Herzog warned "Expectations have moved lower ahead of the print as investors are nervous that PEP’s volume/share could be a little weak as downtrading pressures to private labels (especially in Frito Lay) have increased.”

Higher interest rates, FX pressures, and the new focus on weight loss drugs are also seen as potential negative factors in the downswing.

Thursday PepsiCo (PEP) declined 5.2%, while Coca-Cola (NYSE:KO) was down 4.8%. Keurig Dr Pepper (KDP) was off 4.7% and Monster Beverage (MNST) was nearly 4.3% lower.

Running contrary to the current market sentiment, the Seeking Alpha Quant Rating is flashing Strong Buy on both PepsiCo (PEP) and Coca-Cola (KO).

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Exxon Mobil (NYSE:XOM) is nearing a deal to acquire Pioneer Natural Resources (NYSE:PXD) in a deal that would value the shale driller at about $60 billion.

According to the WSJ report late Thursday, which cited familiar people familiar with the matter, a deal may be finalized in the coming days if the discussions don't hit a last-minute obstacle.

The news comes after the WSJ first reported in early April that Exxon (XOM) held preliminary, informal talks with Pioneer Natural Resources (PXD) about a possible acquisition.

Pioneer Natural (PXD) has a market cap of $50.2 billion. An acquisition of Pioneer would likely be Exxon's (XOM) largest since its purchase of Mobil in 1999. Exxon has a market cap of $445 billion.

A Pioneer Natural (PXD) acquisition would be the second in recent months for Exxon (XOM) after it agreed to buy Denbury Resources (DEN) for almost $5 billion in all-stock deal in July.

Amazon (NASDAQ:AMZN) has cut some employees amongst its communications staff, with the workforce reduction happening across divisions and countries.

More than 5% of the communications division at Amazon Studios, Prime Video and Music is being impacted, Deadline reported, citing sources familiar with the matter.

In a statement to Seeking Alpha, Amazon spokesperson Brad Glasser confirmed the layoffs, which were the result of a recent business review.

The layoffs come one day after Amazon shut down its live-streaming audio service, Amp, nearly a year after it first launched.

Amazon (AMZN) fell 0.8% on Thursday.

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On our catalyst watch for the day,

Wall Street's major averages on Thursday ended marginally lower.

Investors were looking ahead to today’s non-farm payrolls report.

The Nasdaq (COMP.IND) closed 0.12% lower. The S&P 500 (SP500) slipped 0.13%, while the Dow (DJI) retreated 0.03%.

Of the 11 S&P sectors, seven ended in negative territory, led by Consumer Staples. Real Estate and Health Care topped the four gainers. Energy declined ~0.6% as WTI crude oil futures (CL1:COM) slid about 2.3%, a day after falling to four-week lows.

After coming within 2 basis points of 4.90% early on Wednesday, the 10-year yield (US10Y) declined 2 basis points to 4.72%. The 2-year yield (US2Y) was down 3 basis points to 5.02%.

Now let’s take a look at the markets as of 6 am. Ahead of the opening bell today, Dow, S&P and Nasdaq futures are in the green. The Dow is up 0.1%, the S&P 500 is up 0.1% and the Nasdaq is up 0.2%. Crude oil is up 0.1% at more than $82 a barrel.

In the world markets, the FTSE 100 is up 0.5% and the DAX is up 0.8%.

On today’s economic calendar, at 8:30 am nonfarm payrolls. Economists expect 170K job additions for the month and for the unemployment rate to trickle down to 3.7% from 3.8% in August. The UAW strike is not expected to have an impact on the September report. Be sure to tune in to Wall Street Lunch with Kim Khan for a complete analysis of the numbers. Wall Street Lunch is published at noon.