Economy soars. but GM, GE and General Mills slump

1. Bears in a bull market: The American economy is firing on all cylinders — but three of its storied companies are getting left behind.

General Motors has lost $1.5 billion in market value since its 2010 IPO. General Mills (GIS) is grappling with a sales slump in North America. And General Electric’s (GE) market cap is smaller than any time since the Great Recession.

These three American brands, for vastly different reasons, are stuck in bear markets during the longest bull market in Wall Street history. It’s a fresh reminder that even the most iconic companies are targets for disruption in today’s fast-moving world.

Take General Mills, the 152-year-old maker of Cheerios, Haagen-Dazs and Betty Crocker. Like other packaged food companies, General Mills was slow to adapt to the shifting preferences of shoppers.

Americans have shelved sugary cereals and yogurts in favor of healthier breakfast meals. That swing has hurt General Mills, which owns Yoplait, Trix, Lucky Charms and Cinnamon Toast Crunch.

The company has responded by rolling out new brands — and jumping headfirst into the booming market for pet food, a category it left half a century ago. Desperate for growth, General Mills splurged $8 billion on high-end pet food maker Blue Buffalo earlier this year. But even that brand’s sales have slowed under the ownership of General Mills.

No wonder General Mills shares have plunged 40% since peaking in July 2016.

GM (GM) has struggled to kick into high gear since returning to the public markets nearly eight years ago. The company’s profit has barely budged. It lost billions in Europe, and eventually ditched the Opel and Vauxhall brands. More recently, GM has been stung by rising steel and aluminum costs from the Trump administration’s tariffs.

The auto industry has gone in reverse in recent months because of trade uncertainty and higher borrowing costs. And GM is no exception. Its Buick, Cadillac, Chevrolet and GMC brands all suffered sales declines last quarter. All told, GM’s sales fell 11%.

The good news is that GM is in the driver’s seat on self-driving cars, at least among traditional auto makers. GM’s self-driving car unit, known as Cruise, received a $750 million injection from Honda last week. The investment values Cruise at nearly $15 billion.

And then there’s GE. The once-great conglomerate has lost nearly half a trillion in value over the past 18 years.

Under former CEO Jeff Immelt, GE doubled down on fossil fuels at precisely the wrong time by acquiring France’s Alstom, a maker of turbines in coal plants. Now, GE’s power division is crumbling due to the rise of renewable energy.

Saddled with heavy debt from years of bad deals, GE has been forced to raise cash by dismantling its empire. GE is saying goodbye to its health care, railroad and oil-and-gas divisions. Even the light bulb business is going away.

GE is in such disarray that it has handed the keys to Larry Culp, the first outsider CEO in the company’s 126-year history. Relieved that GE is finally trying something new, Wall Street sent GE shares spiking 17% last week — their best week since 2009.

2. Big bank earnings: Several banks report earnings on Friday, including Citigroup, JPMorgan Chase, and PNC Financial. During the first half of the year, tax cuts helped drive bank profits to new records.

One notable exception is Wells Fargo, which also will report its finances before the bell on Friday. Wells Fargo has spent the last two years moving from crisis to crisis. The nightmare is still hurting its business: Bottom-line growth has stalled, and the bank remains in the penalty box with regulators.

3. Turbulence? Delta Air Lines (DAL) reports earnings on Thursday and investors will be watching jet fuel prices carefully.

Airlines have been plagued this year by rising oil prices, which have pinched profits. Delta’s stock is down 6% this year. American Airlines is down 29%, and Southwest has fallen 7%.

4. Google’s big event: It’s Google’s turn for a splashy gadget event on Tuesday. Hardware is a small part of Google’s business, but Android and Google Assistant are crucial to the future of Alphabet.

It’s expected to debut a new Pixel 3 and Pixel 3 XL phone, more Google Home devices (perhaps a speaker with a screen) and showcase what it plans to do with its mobile and voice software.

5. Consumer sentiment: The University of Michigan will release its monthly consumer sentiment report Friday. Consumer sentiment unexpectedly jumped in September to its second-strongest measurement in 2018. Analysts surveyed by Refinitiv expect sentiment to fall slightly to 98.5 this month, down from 100.8 last month — but still historically high.

6. Coming this week:

Monday — US bond market closed for Columbus Day; Nobel Prize in economics announced

Tuesday — Google hardware event

Thursday — Delta (DAL) earnings; Walgreens Boots Alliance (WBA); Deadline for Sky shareholders to accept Comcast offer; Monthly OPEC report

Friday — Citigroup (C), JPMorgan Chase (JPM), Wells Fargo earnings (WFC); US consumer sentiment for October