Market Performance - The S&P 500 and Nasdaq are tracking small weekly gains of 0.3% and 1.1% respectively, while the Dow is pacing for a 0.9% weekly decline [1] - Nvidia's shares are up 2.6% this week following positive comments from CEO Jensen Huang regarding increased computing demand, which has reignited enthusiasm in the AI sector [1] Economic Outlook - The U.S. government shutdown has entered its tenth day, causing delays in key economic data releases, including September's inflation figures [2] - The University of Michigan's consumer sentiment index, set for release, may gain significance due to the absence of government data, with potential implications for the economy if the shutdown continues [3] Earnings Season - Corporate earnings will be in focus next week, with major banks like JPMorgan Chase and Citigroup set to report third-quarter results, which may provide insights into credit quality and consumer health [4] Federal Reserve Commentary - Fed Governor Christopher Waller indicated that there is still room for additional rate cuts, but emphasized the need for caution, reflecting the balance between softening growth and persistent inflation concerns [5] Market Forecast - Traders may experience choppy market action into early next week due to limited economic data, but improving earnings visibility and expectations for further Fed easing could sustain a bullish trend once the government impasse is resolved [6]

Market Overview - The stock market did not reach new record highs, with the Dow down 243 points (-0.52%), S&P 500 down 18 points (-0.28%), Nasdaq down 18 points (-0.08%), and Russell 2000 down 13 points (-0.53%) [1] AI Infrastructure Trade - The AI infrastructure trade remains viable but is experiencing a slowdown in business partnerships, particularly with OpenAI's Sam Altman [2] Economic Reports and Market Activity - The absence of federal economic reports, including Weekly Jobless Claims and August Wholesale Inventories, limits market participants' actions [3] - Q3 earnings season is progressing slowly, and the next Federal Reserve meeting is weeks away [3] Gold and Bitcoin Market Trends - Gold has retreated from its all-time high of over $4000, still viewed as a hedge against a potentially unstable equities market [4] - Bitcoin has also seen a decline, pulling back by 2% [4] Future Market Catalysts - Anticipation for preliminary Consumer Sentiment for August, expected to drop to 53.5 from 60.4, adds to market uncertainty [5] - The government shutdown, now a week old, may be impacting market performance, with limited catalysts for upward movement [6][7]

Financial Data and Key Metrics Changes - The company reported a decrease in top-line guidance while maintaining capital expenditure (CAPEX) guidance, indicating confidence in long-term growth despite near-term headwinds [12][14] - The beer operating margin target remains at 39% to 40%, which is considered best in class, even with some expected deleveraging [65][66] Business Line Data and Key Metrics Changes - The beer segment experienced a decline in sales volume, particularly among Hispanic consumers, attributed to macroeconomic factors and socio-economic concerns [9][10] - The wine and spirits segment showed positive growth, with brands like Kim Crawford and Meiomi contributing to a 2% increase in Q2, maintaining a strong market position [36][70] Market Data and Key Metrics Changes - The company noted significant volatility in sales, particularly in high Hispanic zip code areas, which have underperformed compared to the general market [76] - California has been identified as a major challenge, with expectations for construction opportunities to potentially improve beer sales in the region [77] Company Strategy and Development Direction - The company is focused on maintaining marketing investments to drive long-term growth, despite current economic challenges [25][26] - There is an emphasis on price pack architecture to cater to consumers with varying financial capabilities, ensuring accessibility to products across different price points [44][60] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about hitting the bottom of the current sales decline, while acknowledging unprecedented volatility in the market [76] - The company remains committed to investing in brand loyalty and marketing, particularly targeting younger consumers like Gen Z [10][25] Other Important Information - The company has achieved $105 million in cost savings year-to-date, with ongoing efforts to optimize operations and logistics [48] - Tariff impacts are expected to be around $70 million for the beer business and $20 million for the wine business, tracking with volume changes [53] Q&A Session Summary Question: Volume growth and consumer sentiment - Management highlighted that 80% of consumers are concerned about the socio-economic environment, impacting engagement and volume growth [9][10] Question: CAPEX guidance rationale - The company plans to maintain CAPEX to support long-term growth, despite short-term challenges [12][14] Question: Brand loyalty for Corona and Modelo - Management noted increased loyalty for Corona and Modelo, with specific brands within the portfolio performing well [18][19] Question: Impact of macro factors on beer category - Management believes macro factors are more significant than structural issues, although cannabis and health trends are acknowledged as potential influences [23][24] Question: Beer margin and cost savings - The company reported $65 million in cost savings for Q2, with ongoing initiatives to enhance operational efficiency [47][48] Question: Pricing strategy in light of economic challenges - The company expects to maintain a 1-2% pricing increase, adjusting strategies based on market conditions [72][73] Question: Inventory levels and destocking - Inventory levels are reported to be in a good position, with no significant destocking issues anticipated [70][71]

Key dates this week 🗓️Oct 8 ➡️ 🇺🇸 FOMC MinutesOct 9 ➡️ 🇺🇸 Fed’s Balance SheetOct 10 ➡️ 🇺🇸 Michigan Consumer SentimentWhich dates are you watching? 👀 ...

Consumer Sentiment & Economic Outlook - Lower-income consumers are facing challenges due to rising costs, leading to value-seeking behavior [2][3] - Kagra's management expressed a downbeat view on consumer sentiment and households' ability to handle rising costs [2] - The economy is described as a "barbell economy," with a divide between upper-income spenders and lower-income consumers [3][4] - Consumer confidence is divided based on stock ownership, with stockholders feeling fine and non-stockholders feeling stressed [8][9] Company Performance & Strategy (Kagra) - Kagra caters to lower-income consumers through its frozen food and snacks businesses [4] - Kagra faces challenges due to rising commodity prices (turkey, beef, pork) and tariffs on packaging, steel, and aluminum, resulting in a 7+% increase in costs [4] - Kagra's frozen food business is growing, while its snack business shows mixed results, with beef jerky (Slim Jim) sales rising 4% [5][6] - Kagra is focusing on providing value to customers, especially lower-income consumers, by offering affordable meal options (around $6) and snacks (Slim Jim for $150) [9][10] - Kagra would offer more premium products if the lower-income consumer was healthier, but is currently focusing on value-seeking customers [10] Investment Perspective - Consumer product and food stocks are considered cheap with generous dividend yields due to commodity and volume pressure, making them attractive in a highly valued market [7] - Staples are seen as poised for a turnaround [7]

Core Insights - U.S. consumer sentiment fell to its lowest level since May, with a reading of 55.1 in September, indicating significant concerns about inflation, job security, and the overall economic outlook [1][2]. Consumer Sentiment Overview - Consumer sentiment reflects the optimism or pessimism regarding personal finances and the economy. A high index suggests confidence in spending, while a low index indicates worries that may lead to reduced purchases [2]. - Consumer spending constitutes approximately two-thirds of U.S. economic activity, making shifts in sentiment a potential early indicator of slower economic growth [3]. Factors Contributing to Lower Consumer Sentiment - Economic behavior is influenced by consumer sentiment; uncertainty leads to reduced major purchases and increased savings, negatively impacting overall consumer spending [4]. - Concerns in the job market persist despite a relatively stable labor market, with fears of layoffs, hiring slowdowns, and wage stagnation contributing to anxiety [6]. - Trade policies and tariffs are a significant concern, with nearly 60% of survey respondents mentioning tariffs as a threat to prices and economic stability [6]. - High prices and inflation remain a pressing issue, with everyday expenses like groceries and rent still elevated compared to previous years, despite a general cooling of inflation [6]. Differentiated Impact on Income Groups - Higher-income families with substantial stock portfolios maintained their confidence, supported by a resilient stock market, while lower-income families are more likely to tighten their budgets [5].

Q1 FY26 Financial Performance - Organic net sales decreased by 0.6% to $2,611 million[58] - Adjusted gross margin decreased by 153 bps to 24.4%[58] - Adjusted operating margin decreased by 244 bps to 11.8%[58] - Adjusted EPS decreased by 26.4% to $0.39[58] Segment Performance - Grocery & Snacks net sales decreased by 1.0% to $1,080 million[61] - Refrigerated & Frozen net sales increased by 0.2% to $1,076 million[61] - International net sales decreased by 3.5% to $212 million[61] - Foodservice net sales increased by 0.2% to $265 million[61] Debt and Cash Flow - Net debt decreased from $8 billion to $7.6 billion[42] - Free cash flow was $(26) million, a decrease from $136 million[70] Outlook - The company reaffirms FY26 guidance for organic net sales growth of -1% to +1%[51] - The company reaffirms FY26 guidance for adjusted operating margin of approximately 11.0% to 11.5%[51] - The company reaffirms FY26 guidance for adjusted EPS of $1.70 to $1.85[51] Other Key Points - Total inflation is now expected in the low 7% range[48] - Capital expenditures are estimated at approximately $450 million for FY26[49]

Market Performance - U.S. equity markets ended positively on September 30, 2025, with all major indexes recovering from earlier losses, marking a strong finish to the month and quarter [1][2] - The Dow Jones Industrial Average reached a new record high of 46,397.89 points, with a monthly gain of 1.9% and a quarterly gain of 5.2%, achieving five consecutive months of gains [3] - The S&P 500 rose 0.4% to close at 6,688.46 points, with a 3.5% gain for September and a 7.8% increase for the third quarter, marking its fifth consecutive winning month [2] - The Nasdaq Composite increased by 0.3% to close at 22,660.01 points, with a strong September performance of 5.6% and an 11.2% surge for the third quarter, extending its winning streak to six months [2] Corporate Developments - Pfizer's shares surged 6.8% after a deal was announced for lower medication prices for Medicaid patients, along with a three-year exemption from certain tariffs [4] - Merck also saw a 6.8% increase following a positive recommendation for its RSV prevention product and a new collaboration with Variational AI [4] - CoreWeave's stock jumped 13.9% after Meta Platforms placed a new order for cloud computing services valued at up to $14.2 billion [6] - Lamb Weston reported stronger-than-expected profits, leading to a 5.6% increase in its stock price [6] Sector Movements - Shares of Paycom and Block declined following a partnership announcement between OpenAI and Stripe, which is expected to create competitive pressures in the payment sector [5] - ExxonMobil announced plans to lay off 2,000 workers as part of a restructuring effort [7] Economic Indicators - The Consumer Confidence Index fell to 94.5 in September, its lowest since April, indicating concerns about the job market [9] - The Federal Reserve cut the federal funds rate by 25 basis points to a range of 4.00%-4.25%, with projections for further cuts by the end of 2025 [10] Upcoming Events - Key economic data releases are scheduled for October, including the ADP Employment Report and the Consumer Price Index [13][11]

Economic Overview - The U.S. economy showed a stronger than expected rebound in Q2 with a real GDP increase of 3.8% annualized, contrasting with a 0.6% contraction in Q1 and surpassing the 3.3% forecast [3] - Consumer spending was a primary driver of this growth, although it was partially offset by declines in business investment and exports [3] Inflation Data - The Core PCE Price Index rose 2.9% year-over-year in August, consistent with forecasts, while the headline index increased by 2.7%, marking its highest level since April 2024 [2] - Monthly core prices rose by 0.2% and headline prices by 0.3%, both in line with expectations [2] Consumer Sentiment - The University of Michigan Consumer Sentiment Index fell to 55.1 in September, a decline of over 5.0% and below the forecast of 55.4, indicating growing economic concerns among households [4][5] - The deterioration in sentiment was broad-based, affecting nearly all demographic groups, except for consumers with large stock holdings [5] Market Reactions - The S&P 500 experienced its first weekly loss in almost a month, down 0.3%, despite reaching a new record high earlier in the week [7] - The 10-year Treasury yield ended the week at 4.20%, while the 2-year note finished at 3.63% [7] Federal Reserve Outlook - The CME FedWatch Tool indicates a 90% likelihood of a 25 basis point rate cut at the next Federal Reserve meeting, with additional cuts anticipated in December and 2026 [8] Upcoming Economic Data - The upcoming week will feature key labor market data, including the BLS Employment Report, ADP Employment Report, and JOLTS Report, alongside ISM Manufacturing and Services PMIs [10]

Core Insights - Consumer sentiment dropped 5.3% month over month in September, marking a 26% decline year to date, indicating persistent pressure on households [3][6] - The "expectations" index fell 7.5% in September and is now 29% below its December 2024 level, while the "current" index decreased by 2.1% and has seen a 20% decline this year [5][6] - High inflation expectations and stretched household budgets suggest cautious future spending intent, with essentials being prioritized over discretionary spending [8][11] Consumer Sentiment Analysis - The decline in consumer sentiment reflects a broader concern about macroeconomic conditions, particularly regarding labor markets and personal finances [4][10] - 44% of respondents noted that high prices are eroding their personal finances, the highest level recorded in a year [6] - Personal consumption expenditures increased by 2.7% over the past year, while real disposable incomes grew only 1.9%, indicating that spending has outpaced income for eight consecutive months [6] Spending Behavior - Households are increasingly prioritizing essential expenses such as rent, groceries, childcare, and utilities, while non-essential spending is being sidelined [7][8] - The uncertainty surrounding job security and income is leading consumers to delay or downsize purchases, particularly in big-ticket categories like automobiles and vacations [9][10] - The recalibration of daily spending habits in response to economic pressures is expected to continue influencing consumer behavior in the coming months [11]