Wall Street Pulls Back as Earnings Season Kicks Off; PepsiCo, Delta, and Costco Defy the Trend

Wall Street hit the brakes yesterday. The Dow Jones slipped 0.5%, while the Nasdaq lost 0.1%. The pullback came as investors paused to catch their breath after weeks of relentless AI-driven gains.

What’s becoming clearer is that the “AI trade” may be running ahead of itself. Piper Sandler’s Craig Johnson put it rather bluntly: “Some valuations look stretched, and it’s wise to be cautious.” Translation: not every stock with a chatbot deserves nosebleed multiples.

The backdrop wasn’t helped by Washington’s ongoing budget chaos. The U.S. government shutdown has now dragged into its second week, with no resolution in sight. Meanwhile, the Fed minutes revealed division among policymakers on whether additional rate cuts this year are warranted.

In short: confusion reigns.

On the geopolitical front, a ceasefire between Israel and Gaza briefly cooled oil markets. Brent crude dropped around 0.5%, with analysts at Rystad Energy suggesting the risk premium could fade further if peace prospects hold. Lower energy costs would be a welcome relief for inflation-watchers.

Company Highlights

PepsiCo: Fizzing Above Expectations

PepsiCo (PEP | +4.23%) proved yesterday that not all consumer-facing companies are struggling. Third-quarter revenue landed at $23.94 billion, just above expectations, while adjusted EPS came in at $2.29 (consensus: $2.26). Demand for its healthier drinks and snacks held firm globally, particularly in energy drinks.

The company also announced a big management change: long-serving CFO Jamie Caulfield is stepping down, to be replaced by Steve Schmitt from Walmart.

While RBC analyst Nik Modi warns that Pepsi’s beverage division continues to lose market share, I can’t help but think this leadership shake-up could be exactly what’s needed to refocus on brand strength. Still, with revenue growth sluggish, Pepsi will need more than a sugar rush to sustain momentum.

Delta Air Lines: Flying High

Delta Air Lines (DAL | +4.29%) surprised even the skeptics with robust third-quarter results. Revenue rose 6% to $16.67 billion, and EPS jumped 14% to $1.70 (vs. $1.56 expected). Demand for premium flights is soaring, with business travel revenue up 8%.

CEO Ed Bastian stressed that their customer base remains financially resilient, even as many peers cite a cautious consumer. Personally, I find Delta’s pivot toward luxury travel an interesting hedge against the low-cost carriers, it’s working for now, but it does leave them more exposed if corporate budgets tighten.

United Airlines (UAL | +3.31%) also climbed in sympathy.

Costco: Consumer Still Showing Up

Costco (COST | +3.07%) reassured investors that U.S. shoppers haven’t disappeared just yet. Comparable sales rose 5.7% in September, to $26.58 billion, easily beating the 4.6% estimate. Citi’s Steven Zaccone summed it up: retail trends remain “solid and stable.”

If you ask me, Costco is once again proving why it’s a defensive darling during uncertain times. People may cut back, but they’re not giving up their bulk toilet paper and rotisserie chickens.

Other Movers Worth Noting

Novo Nordisk (NVO | -1.56%) announced a $4.7 billion acquisition of Akero Therapeutics (AKRO | +16.33%). The Danish pharma giant is doubling down on metabolic disease treatments, but investors seemed skeptical about the price tag.

Tesla (TSLA | -0.72%) came under pressure after U.S. regulators opened a probe into its Full Self-Driving technology. For Elon Musk, another regulatory headache is probably the last thing he needed.

Final Thoughts

The market mood yesterday was one of cautious recalibration. AI hype cooled, politics weighed, and the Fed kept everyone guessing. Yet, beneath the surface, solid corporate results - from PepsiCo, Delta, and Costco - show that not every corner of the economy is flashing red.

I’d call it a healthy reset rather than the start of something darker. For investors, the lesson is clear: while it pays to ride the big themes like AI, don’t underestimate the staying power of snacks, bulk retail, and premium air travel. Sometimes the boring stuff still delivers the best returns.

Kristoff - ChartMill

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