The Rundown - Mars Acquires Cheez-It Maker for $36 Billion, Google Launches New Pixel Smartphone

Episode Date: August 14, 2024

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Public.com presents the rundown, your daily market update in five minutes. My name is Zaid Admani, and today is Wednesday, August 14th. In today's episode, we'll recap the July CPI report that just came out this morning and how markets are reacting to this latest inflation data. Also, Southwest Airlines is prepping for battle against some hedge funds, and Google announced new phones with a ton of new AI features. Then stick around to the end of the show to find out why the housing market might stay frozen until rates fall below 5%.

All right, let's go. Stocks were flying yesterday. The S&P 500 was up 1.7% and the NASDAG jumped by 2.4% thanks to some positive inflation data. Yesterday we got the PPI report which some people call the wholesale inflation and it showed that inflation continues to cool.

And we had a pretty broad-based rally yesterday. It wasn't just dominated by the big names. I mean, yeah, sure the Mac 7s made a splash with Nvidia and Tesla both up more than 5%. but 425 stocks in the S&P 500 were up yesterday. So you love to see that. And one of the biggest winners yesterday was Starbucks. The stock had one of its best trading days ever up more than 24.5%.

It added over $20 billion in market cap, all because the company announced a new CEO. Their new CEO is Brian Nichols. Starbucks pretty much stole him from Chipotle. He'd been the CEO of Chipotle since 2018. And the reason Starbucks investors are so hype is because Chipotle's stock has, has gone up over 700% during Brian Nichols' tenure. And Starbucks is hoping that he can do the same thing for them. So Brian Nichol has big shoes to fill.

We talked more about this in detail on yesterday's episode and also why Starbucks was kind of forced to make a change as CEO. So go check out yesterday's episode if you want to stay up to date on all the drama happening over at Starbucks. Also on yesterday's episode, we asked you guys if you'd rather be the CEO of Starbucks or Chipotle. And according to the poll on Spotify, 58% of you guys voted for Chipotle.

I mean, that's what I would have voted for too. By the way, there's already been a lot of great memes about how the size of coffee cups are about to shrink now that Brian Nicol is taking over as CEO of Starbucks. Switching gears real quick, the July CPI report just dropped this morning, and inflation in July came in at 2.9% compared to last year. That's the lowest annual rate since March of 2021. Core CPI, which some people think is more important since it removes volatile prices like food and energy, was up 3.2% in July. That's the lowest annual rate since April of 2021. So these numbers are encouraging. They came in line with expectations and it continues to show that inflation is cooling. And even though these numbers aren't quite at the 2% target the Fed has, the market is still expecting the Fed to cut rates in September.

In fact, there's a 100% chance according to the CME Fed Watch tool. Now it's just a matter of how big of a cut are we going to get. We'll have to wait a few weeks, but all the data looks pretty encouraging. Let's run through some headlines. Let's start with Southwest Airlines because Activich Hedge Fund, Elliott Management, announced that they're ready to to go to battle against Southwest Airlines, a proxy battle. Essentially, Elliott Management wants to replace the Southwest Board of Directors with their own people to force changes at the company that will improve Southwest's business and therefore increase its stock price. That's kind of what

activist investors do. Elliot Management has an 11% stake in Southwest Airlines, and they want to nominate 10 members to the Southwest Board of Directors to replace the existing board members. And they're ready to have the shareholders vote on it. This hedge fund is already putting out hit pieces against Southwest. they point to the fact that Southwest's board of directors doesn't have any members with experience from other airlines. And they're saying that that's one of the reasons why Southwest has had a ton of mistakes and lagging behind their competitors. Now Southwest has already taken some steps to make changes.

Like, for example, they're removing open seating starting next year. I mean, they were the only airlines still doing that and I think they realized that people don't want to pick random seats like boarding a bus. And they're also going to be offering premium seating plans. So we'll see if these changes that Southwest is enough to turn around the company and keep Elliott management at bay. Let's talk about Google, because they had an event yesterday

called Made by Google, where they announced their ninth generation of their pixel smartphones. And it wasn't really the hardware that got all the attention. It was all the new AI features. The new phones will have

an AI image editing tool. There's also a new screenshots app that can analyze your screenshots and search for information. There's also a feature that can listen to your phone calls and summarize the phone call for you. Not creepy at all, right?

But I think the most impressive thing was the AI voice chat option. Google's calling it Gemini Live. I saw some demos and it looked pretty cool. I mean, definitely more useful than Siri. I'll tell you that much. But the kicker is some of these AI tools like this Gemini Live feature I just told you about, it's not going to be free. There's going to be a $20 a month subscription required. I mean, this thing needs to be insanely good if Google wants people to pay 20 bucks a month for it. But overall, I think the big theme right now with smartphones is that it's not just about the hardware, but it's also about the software. We're

probably going to learn more about Apple Intelligence next month when Apple announces their new iPhone. And there's a lot writing on this stuff because Google, Apple, and other big tech company stock price have gone up big this year because of the hype around AI. And investors are now looking to see if it's going to result in some revenue for these big tech companies. I mean, all these AI tools are great, but if no one pays for them, it doesn't really mean anything, you know? By the way, during this presentation, Google took some shots at Apple. And I love little tech rivalries like this. We need more tech companies to beef, you know? Let's talk about some stocks making moves today.

Shares of Kellenova are soaring this morning after the snack company, Mars, this is the company behind M&M, Snickers, and other candies, announced that it's buying Kallanova for around $36 billion. Now, this was rumored for the past couple weeks, but the official acquisition price was announced today. Mars is buying Kellenova for $83.50 a share. And by the way, Kellenova used to be part of Kellogg's, but it got spun off as its own company a couple years ago. Now, this deal might face some regulatory scrutiny due to the size of a deal, but the power

that both these companies combined would have in the snacking department. Because Kelanova owns a ton of major brands. I'm talking Pringles, Pop Tarts, Kind bars, and more. I mean, if you look at your pantry right now, I'm sure like 70% of it is dominated by Kelanova. And I'm sure the candy that you eat, a lot of it is by Mars as well. So we'll see if the regulators let this deal go through. But Kelanova investors are pretty happy.

Kelanova shares are up more than 7% on this news. On the flip side of stock not doing so great this morning is Brinker International. This is the company behind restaurant chain Chili's. Shares are plummeting after the company missed on earnings and provided a lower than expected outlook for the year. I think it's possible that customers might be catching on to the fact that the fajitas are just the workers pouring water onto the hot plate before leaving the kitchen to, you know, make it sizzle. Because no way they're naturally sizzling like that.

Anytime somebody gets to fajitas, you just can't stop looking at the sizzling. It's such an attention grabber. Then it makes me want to get fajitas. But that strategy isn't working out for the company right now, and shares are down 13% on the news. All right, let's wrap the show with a fun fact. 81% of homeowners have a mortgage rate below 5% according to Fannie Mae. That number is a lot bigger than I thought,

and I think it's one of the biggest reasons why the housing market right now has grinded to a halt. Homeowners with a low interest rate just don't want to sell their homes. Nobody wants to give up that low interest rate. It's like golden handcuffs. Well, all right, guys, that's the rundown for today. Hope you guys enjoyed today's show. If you did, don't forget to hit us with that five-star rating on Apple and Spotify.

We are so close to hitting 3,000 five-star ratings on Spotify. Thank you to everyone that's already given us five stars. Thank you guys again for listening. Shout out to Connor and Mike for all the help behind the scenes. And we'll see you guys back here tomorrow. This is the rundown. Your real-time resource for news events and trends in the markets. All views presented in the show reflect the opinions of the guests.

You should not take any mention of a publicly traded security as recommendation to buy, sell, or hold that security. Run-down guests are not financial advisors and are not affiliated with public holdings or its subsidiaries. You should make your own financial and investment. decisions or consult respected professionals. Learn more at public.com disclosures. In partnership with Zayidimani, brokerage services for U.S. listed, registered securities are offered by open to the public investing Incorporated, member FINRA and SIPC.