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The Exchange
Data Dearth, Gambling Lows and Tariff-Proof Taylor 10/3/25
00:43:03
With the jobs number delayed due to the government shutdown, we dig into alternative data for a read on the economy. Increased competition weighs on betting stocks. Plus, why the newest showgirl is duty-free.
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Hmm.
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C
That's music to my ears.
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I can only talk.
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D
Thank you Scott welcome to the Exchange. I'm Mike Santoli along with Melissa Lee. Stocks hitting fresh all time highs yet again as day three of the shutdown rolls on and no jobs data was ROL all three major indices on pace for their six straight days of gains. The small cap Russell 2000 also hitting an all time high today, outperforming up by a percent and a half.
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C
Yep.
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A
Big tech mix Metta and Tesla down more than a percent this after of course Tesla fell 5% yesterday. Nvidia meantime trying to hold on to a seven day winning streak. It's up 6% in that time. A new report saying CEO Jensen Huang is frustrated with delays over the company's chips deal with the UAE. And Bitcoin also on pace for seven straight days of gains within 1% of its all time high right now up 5% since the shutdown began. Although we've discussed this, it seems like there's always a case for bitcoin just like there's always a case for gold.
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D
The all weather assets without fundamentals because that's one of the reasons that you can always find a reason it's a store of some kind of value. Really interesting in a sense today because the equity markets acting like bad news on ism services is kind of good news because it makes the Fed easier. On the other hand, bonds aren't taking it that way. It just feels as if it kind of fits in with the risk seeking mode. Small caps, micro caps, quantum crypto all racing ahead. We mentioned Tesla down. Tesla and Palantir are the biggest downside pressure points on the S and P. So that's like mega cap momentum, right? That's kind of unwinding but it's finding its way elsewhere.
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A
Yeah. And of course part of the unwind For Tesla, it's not. I mean, in the scheme of things, it was up 33% prior to the numbers, so had a huge run. And the valuation of small caps, though, that's really interesting. If you take a look, compared to S&P 500, it's like 17 times forward versus 25. So that's historically. That divergence is historically wide.
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D
Very wide, yeah.
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A
Meantime, it is jobs Friday, except there's no data today due to the government shutdown. Other sources of information, though, can provide clues on the state of the labor market. One of them is layoffs, which fell 37% in September month on month. But year to date, job cuts are up 55% from year ago levels, the highest since 2020. Our next guest says you usually see these numbers during recessions or period of major disruptions such as the first wave of automation. Joining us now is Andy Challenger, senior vice president of outplacement firm Challenger Gray and Christmas. Andy, great to have us.
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F
Thanks for having me on.
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A
So it sounds like if you took a look at the numbers, you would think that we're in a recessionary environment and yet we have the economy here humming along, so to speak, in some degree. And I'm wondering if you sort of look at this and are puzzled or does it make sense?
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F
Yeah, I think it makes sense to me from what we've seen in the labor market for some, quite some time. We've been going through a gradual cooling of the labor market for more than two years. It's continuing on that path. We have seen an elevated number of job cut announcements this year. In fact, it's the highest since 2020. The Q3 numbers are the highest that we've seen since 2020. So it's not just the doge cuts at the beginning of the year, but it's continued throughout this entire year that we've seen this elevated number of layoff announcements. And our perspective in the world, which is talking to companies that are going through layoffs and working with people that have just been laid off, we're expecting to stay quite busy through the end of the year and into next year, in fact, are preparing for an acceleration.
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A
So in your conversations with with companies, and I'm just curious what the stance in general the companies are, what the mindsets are, are they laying out their layout plans but not executing yet? Are they, do they intend on executing? What are the sort of reads that you'.
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F
Yeah, and I'm biased. I'm only talking to companies that are going through layoffs. So it's my perspective but we're seeing a lot of companies throughout the year announcing layoffs because of downgraded forecasts internally that they are worried about economic and market conditions. Then really just in the last couple of months, am in earnest seeing companies announce job cuts and attaching it to artificial intelligence and the way that's going to be changing their workforce in the coming months and years.
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D
Andy, how does this fit in with what's become a fairly common view, it seems, of the labor market, that we're at this kind of uneasy equilibrium. Not much hiring, not much firing going on. The aggregate numbers seem to suggest that, you know, you have low new jobless claims from the official data, but the continuing claims are building up and there's not a very high hiring rate happening.
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F
Yeah, I mean, for us, the signals have been relatively negative on the labor market for some time. It hasn't been disastrous. We don't see the types of layoffs that we see in a sharp recession where things fall off a cliff. But we've seen steady activity and cooling in the labor market for a long period of time. And at some point you had an equilibrium coming out of a really, really hot job market that we had for so many two or three years. Now I think there is the real concern that layoffs beget layoffs beget layoffs. If more companies continue to cut, that can further erode consumer spending confidence companies have and lead to more layoffs. So, you know, the hope is, obviously we land in some soft place and things really level out from here. But we really would not want to see the labor market weaken much past where we're at, to feel like we've really controlled the overheating that we experienced for some time.
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A
When you say past where we're at, do you mean a total of almost 1 million year to date? What is that sort of line in the sand for you?
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F
Yeah, we've only seen job cuts announcements surpass a million, which were well on track to do this year in years when we've also known in retrospect that we were in recession. So it's, you know, it's a. It is a worrying set of numbers. It's not the entire economy. It's one piece of data. But certainly from our perspective, we don't expect the job market to be better three to six months from now than it is today.
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D
Andy, there was just. There's been this real shift, I imagine, in corporate psychology. If you just go back to the pandemic and the immediate aftermath, these companies were in this labor shortage mode. Right. You Had a hoard labor because hiring was difficult, job growth was strong coming out. And I guess many ended up finding that they don't need quite as many people. But, but again, you know, I go back to the aggregate numbers. You're seeing a lot more layoff announcements and companies executing these reduction programs. But it's not shaking out into. Into being like a lot of flow into the unemployed.
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F
Yeah, it's selma flow into the unemployment to the point where we're definitely concerned about what it means for the overall economy. We for the last two years have also seen elevated job cuts as the labor market and overall economy in some ways cooled. We don't expect that those job cuts are going to continue forever. A lot of the cuts that we have seen in the past two years were very much tied to companies overextending themselves and hiring too much in a bonanza in those first couple of years post Covid when there was some maybe unrealistic expectations, particularly in tech, some in finance, a couple of different areas where maybe the world was going to change permanently after COVID 19 as things have returned to normal. There's a couple industries that have come back down to earth. But that story is wearing a little thin. Three, almost three years into the cooling of the labor market. And I think there's a real possibility that at this point we're starting to see or will soon see real damage to the labor market.
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A
Yeah. And in that vein, let's talk about hiring plans and what you're seeing. September marking the lowest year to date hiring plan since 2009. Are you expecting that sort of drought to continue?
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F
Yeah, I mean companies are just tepid to announce much hiring right now. Clearly we're seeing that in the government stats that we've seen so far this year. A cooling and job hiring and adding to the payrolls at organizations across the country. But we're also seeing that companies are accelerating their cuts right now. So it's, it's a concerning time, I think, for, for people that are in the, in the job market right now.
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A
Andy, great to get your perspective. Thank you.
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F
Thanks for having me.
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Andy. Challenger. Challenger, Gray and Christmas. Let's get a quick check on shares of Apple. Fractionally higher here after getting a rare downgrade to a sell. At Jefferies, the firm sees 20% downside saying current expectations for a super upgrade cycle are too high. The better Demand for the iPhone 17 is partly thanks to a price cut on the base mod. The stock is up about 9% since last month's launch event. Jefferies becomes only the third sell rating on the street with 31 buys. Seventeen holds this all according to Factset. But you know, it had been sort of highlighted by other analysts that it's the lower base model that is fueling the demand here. The higher costs, you know, higher margin models, they're not in demand as much. So that's definitely a part of the.
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D
Bear case, without a doubt. It's really fascinating because if you go right back to before this launch, there were very low expectations, at least in the weeks ahead of it. And so okay. And the stocks at 215 low expectations, better than expected initial sales, even if it's not great for margins, gets the stock up above 250 and all of a sudden you can now make the case looks a little rich relative to the outlook for how this is going to flow through to further upgrade.
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A
Yeah, but the foldable phone, which is the next big thing coming supposedly next year, they're also saying there's too much expectation for that.
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D
Yes.
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A
I don't know if you want a foldable phone.
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D
It's not certainly I don't have an organic desire for one. And I guess they're going to have to convince you that this is something you've been waiting for even though you don't know it. We did have the analyst on the walk on the street this morning and he basically said he thinks that's the mistake the market is making is just extrapolating good initial sales in this upgrade cycle to the next to the foldable as if it's this big pent up demand moment.
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Yeah.
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All right. Well, coming up, betting stocks have been on a cold streak down big for the week as more players move into that space. Is DraftKings in danger of losing its MVP status? We'll trade it next.
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Plus, there may be no jobs report, but there is a new Taylor Swift album out today and it's tariff proof. We'll explain that ahead. The extreme the exchange is back right after this.
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This is the exchange on cnbc.
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Julia Boorstin sits down with Thrive Global founder and CEO Arianna Huffington.
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What advice would you give to young.
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People now trying to navigate this crazy world?
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My advice is to pick a time at the end of the day that you declare as the end of your working day, because let's face it, there is no end to our working day.
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JULIA boorstin, host, CNBC Changemakers and power players. Listen now, wherever you get your podcasts.
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D
Welcome back to the Exchange. Betting stocks getting slammed this week as the gambling space gets more crowded with the likes of Kalshee trying to grab market share. Graft kings down nearly 15% on pace for its worst week since February, while Flutter, the parent company of FanDuel, is lower by 9% and now negative for the year, but both slightly higher today after a Nevada official, Nevada federal judge Rather, ruled that sports predictions markets do not qualify as swaps, which could mean less regulation for online betting moving forward. So for more, we're joined by David Katz, gaming, lodging and leisure analyst at Jefferies. David, great to have you on. I mean, you do cover DraftKings. Obviously, the market has decided that their head start maybe has eroded to some degree. It's going to get more competitive, less fruitful for them. Do you agree?
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H
I do not. The narrative that's out there that Kalshi is taking share that would be available to DraftKings otherwise, we believe is not substantive. We've done a fair amount of work on what the prediction markets are doing, how they're doing it, how that relates to the numbers that they are putting out there. And they have made some progress in what they're doing. However, what they're flourishing in is this debate, Mike, that you highlighted in your introduction about the legality of swap contracts and whether what they're doing is a swap and therefore federally regulated. Meanwhile, the state gaming regulators have warned the likes of DraftKings and FanDuel that they should not be in the prediction markets either in their state or anywhere else because they treat it as illegal gaming. And that's what's keeping them on the sidelines. If we can get to a regulatory conclusion, a legal conclusion on this, and I don't believe we will anytime soon, if we could get to a legal conclusion, the likes of DraftKings and FanDuel and a side by side would perform very well, frankly, quite a bit better than what Kalshee has in our estimation.
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D
I, you know, I keep an eye on, for example, the brokerage industry and the analysts to cover Robinhood are pretty excited about Robinhood's partnership with Kalshi and how much volume is already flowing through there. Maybe you're forming habits among people who have a Robinhood account. I don't know if we're going to get into the whole, you know, regulatory specifics in terms of how that's going to play out. I just wonder if the general case of there are going to be more venues for people to execute on sports betting.
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H
Yeah, I think what what those entities are offering is a highly limited and somewhat primitive offering as compared to what's available in the legal and regulated sports betting markets. Right. The you know, the version of of parlays that started coming out last week from Kalshi is, you know, is, is somewhat constructed and you know it's not something that would be competitive in a side by side. And by the way, you know, if you talk to DraftKings, if you talk to FanDuel, they are aligning their resources for the moment when state gaming regulators do an about face, which I do think is an eventuality and decide that they will legalize, regulate and potentially tax prediction markets and then you'll have a level competitive playing field. For right now it creates the pretense that they are, you know, taking something from DraftKings and FanDuel which we don't believe to be the case. And what makes it worse is that the early season NFL season luck or hold percentage for the legalized operators has been a little choppy and so you're seeing analysts numbers coming down and it creates the optic that that's as a result of Kalshi and it is not.
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A
Okay, but how about just on the margin, David, is there any impact? I mean there may not be direct share being taken away from DraftKings but I'm just curious if you're sort of the, the casual person new to gaming and you're on Robinhood, already and your propensity is to make bets on or trade meme stocks and things that Robinhood is normally associated with. Maybe you try Kalsheet, maybe you don't go to DraftKings for that, you know, initial sort of experience with betting and you stick with Robinhood. I mean, how do you sort of think about it in the future in terms of not necessarily taking a customer away, but taking that future customer away.
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H
Right. Look, I think the survey work that we've done validates Michelle, the, the Melissa, the you know, the propensity for players to try whether it's in a legalized or not state. You know, our sense and our experience long term with gaming is that you know, the, the, the easy way to try and yes, maybe they're inducing trial, but I think at the end of the day where the big volume is right and the big volume driver in OSB right now is in play betting. Right. Which Is, which is 70% of the volume in European sports betting. Right. That's first taking hold in the US that is not something that Kalshee or Robinhood are going to be. Yes, they will induce trial. Are they going to be a long term player? I don't think so. I think they're going to continue to flourish in this period of regulatory uncertainty where the big guns are forced to stay on the sidelines for a period of time.
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D
All right, David will see how it, how it plays from here. Thanks very much for your, for your thoughts. David Katz, thank you.
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Coming up, health care stocks surging 7% since Monday, wrapping up their best week in more than three years. And Johnson Johnson getting an upgrade to overweight at Wells Fargo. That stock hitting an all time high today. We'll check the charts in the health care space next.
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Julia Boorstin sits down with Thrive Global founder and CEO Arianna Huffington.
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A
What advice would you give to young.
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E
People now trying to navigate this crazy world?
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C
My advice is to pick a time at the end of the day that you declare as the end of your working day because let's face it, there is no end to our working day.
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G
Julia Boorstin hosts CNBC Changemakers and Power Players. Listen now wherever you get your podcasts.
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A
Welcome back. And Mike is charting health care here.
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D
Yes, one of the big market stories of the week is how health care has come roaring off the mat. That's the xlv, the orange line here. And it's compared here to consumer staples, another one of the traditional defensive stable sectors of the market. They both underperform but you see on a two year basis health care trying to catch up here. One thing folks have been pointing out, maybe this downtrend line has been broken. See if that brings in follow on buyers or at least people who had been underweight. The sector wanting to come in. Now one of the big outperformers the last year actually last little while is JJ get another upgrade today. Here it is against the broader pharmaceuticals ETF on a two year basis. So you see it's kind of a catch up move, very similar angle. JJ consider kind of one of the more quality insulated plays within legacy Big Pharma did also want to point out biotech. So biotech kind of moves fastest, kind of the edge of the risk curve for the sector. IWC is the micro cap etf. There you go. Xpi, of course, ETF covering biotech and pretty similar cadence here is what I wanted to point out. That's when biotech starts to move. People want to grab for lower quality, all the values in the future. And it's running fast right here.
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A
You see that certainly is, I mean there's a whole narrative dealmaking helping to inspire the sector to go higher. But Pfizer, we were just talking about that in the break. I mean this whole rally here, not the whole rally, but a lot of the rally is like the health care rally that Albert Bourla built. Right. I mean, Pfizer's gain this week is tremendous, up 15% and.
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D
Exactly. And so finding a way to sidestep the threatened regulations and tariffs from the administration, saying we'll go direct to consumer and then but it obviously was wound very tight, that stock and it just unleashed because people just didn't see any reason to be bullish about it just a couple of weeks ago.
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A
Now let's get to Sima Modi for CNBC News Update. SIMA Hi, Melissa.
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I
Here's the news. The federal government has reimbursed Florida $608 million for costs related to the detention center known as Alligator Alcatraz. That's according to the ap. Now environmental groups have sued to close the center and federal payments could affect the outcome of the lawsuit. In other news, Apple erasing an app from its app store that tracked ICE agents. The app called Ice Block said in a post on Blue sky that Apple said its removal was due to objectionable content. It comes after Attorney General Pom Bondi told Fox Business that the Trump administration demanded Apple remove the app. Google has also removed a similar app from Google Play Store. And the WNBA finals begin tonight between the Phoenix Mercury and the Las Vegas Aces right in the middle of the of an intense collective bargaining agreement negotiation. There's Nafisa Collier, a VP of the WNBA's Player Association. She says Tuesday that the league was has the worst leadership in the world as players seek higher wages amid a new media rights deal with a WNBA commissioner. Kathy Engelbert speaking tonight publicly for the first time since those comments. We'll keep you updated on that one, Michael and Melissa.
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D
All right, Seema, thank you. Coming up, only four of the so called magnificent seven stocks are beating the S and P this year. Is it just part of a healthy rotation in the market or something else? We'll ask Charles Schwab's chief investment strategist Liz Ann Sonders about that. That's next.
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A
Welcome back to the exchange markets. Right now our mix, the Dow just dipping negative here. The s and P500 at basically record levels. And we've got the Dow higher by just almost a percent at this point.
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D
All right. We are in day three of the government shutdown. The Senate holding a procedural vote on two short term government funding measures. Let's get to Emily Wilkins in D.C. for where it all stands. Emily?
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G
Michael, yeah. The Senators, they're just about to start votes on a series of bills, and that's going to include another attempt to fund the government until November 21st. Now, again, that is expected to fail to reach the needed 60 votes. And there is no sign at this point of when this shutdown is going to end. But we are hearing about a couple potential off ramps emerging, including a group of bipartisan lawmakers that are trying to find a path forward to reach an agreement on extending some of those health care premium tax credits. One of the centers at the center of those discussions, New Hampshire Democrat Jeanne Shaheen told me that while the credits don't expire until the end of the year, a fix needs to come before then.
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A
The challenge is that there's some real urgency about this because the tax credits don't expire until the end of December.
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C
But the marketplace, so people have to.
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Enroll in health care on November 1, and insurance companies are setting their rates in October.
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G
A majority of the 24 million Americans who get the tax credits could see their cost of their premiums rise 75% if those credits do wind up expiring. Now, some Republicans, they are open to a limited extension of the credits, maybe something with an income cap on it, but they say that the government must be funded before they finalize a deal. Now, she told me that Democrats are going to need some sort of guarantees that if they reopen the government, the tax credits will be addressed. So, guys, it seems like there is some momentum here, some willingness to go forward on this, but Republicans are basically saying we can't do anything until the government's open. And Democrats are saying, hey, we need some sort of guarantee that once that happens, we will be addressing this, guys.
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A
But the bigger issue of extending even some credits, Emily, has the White House indicated that it would support such a measure?
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G
You know, we actually haven't seen the White House go ahead and weigh in yet on this. What we heard from Democrats after they met with Trump earlier in the week, last week was saying that their Trump did seem to acknowledge that he did not want health care to increase. And Republicans have even said, look, we're open to discussions on this, we're open to talking things through, but at this point, they're saying we cannot move forward until the government is funded. So it seems like there, it's one of those weird times in politics where there is a lot of agreement, but there is just a question of exactly what the process is going to need to be and how certain are Democrats going to be able that if they do give the votes for the government to open that these tax credits will be addressed.
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D
And Emily, I'm wondering how the administration's moves to withhold or pull back funding from various programs and their tough talk about closing agencies and all the rest feeds into this process. Does it add a layer of complexity? Would Democrats say, hey, before we reopen the government or come to a deal, we want to have those things reversed? Or how do we even know how that works into it?
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G
Yeah, I think really a lot of things are on the table right now when it comes both to this current funding, which of course is just a seven week stopgap, and then the actual funding for fiscal year 2026, which still has to get worked out out. I think there are tons of questions around there on that. Obviously, the White House is trying to make some of these moves to put pressure on Democrats, but I think at the same point you have to be aware of exactly what's being cut and where. As we saw with that $8 billion that the White House rescinded from green energy projects, most of them are in states with Democratic senators, but some of them are actually occurring in districts that are represented by a Republican in the House of Representatives. So there does seem to be a little bit of overlap here in how Republicans are being impacted. And even with these tax credits, we saw a new report today from the Kaiser Family foundation showing that a lot of the folks who are going to be impacted are in states that have Republican senators. So a lot of crossover on the politics here and I think a lot of questions as to exactly what's going to happen with these soon to be coming, apparently soon layoffs as well as some of the cuts that have already been announced.
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A
Emily, thank you. Emily Wilkins, our next guest, says with the absence of key data like today's jobs report puts a brighter spotlight on the upcoming earnings season for stocks. Joining us now, Liz Ann Saunders, chief investment strategist at Charles Schwab. Liz Ann, great to have you with us. I would imagine the bar is even higher going into earnings season given where the markets are. How are you feeling about valuations here as we sit about to enter that period of earnings reports?
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C
Yeah, I mean valuations certainly are historically stretched, but I think you have to segment the market. You can look at the overall S and p trading about 22 times 4 forward earnings equal weight or the other 4993 if you want to use the Magnificent 7 more reasonable valuations, you go up the cap spectrum into the mega cap tech names, then you go up closer to 30. I do think what's been interesting about earnings this year Is you had two very strong quarters in the first half of the year where once all was said and done, earnings ended up being about double what the consensus expectation was. And there hasn't been much extrapolation into the second half of this year and even into 2026. So one could argue that the bar is still set fairly low. The one thing I worry about is that when we got the GDP revision, which was an upside revision to gdp, embedded in that are the NIPA profits, which is a broader measure of profits, it goes down the cap spectrum into S Corps, and those profits were revised down two quarters in a row into negative territory. So that's something to be mindful of, that maybe we get to a point where the bar could be set a little bit too high.
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D
And I guess, listen, you know, there's been some commentary about how, for example, for the third quarter, the overall S&P 500 earnings estimates held up really well. It might be because of those, you know, kind of top heavy, huge earners at the, at the higher end. So I guess the question is, where is this? Has this been an earnings cycle? Broadly speaking, you have people make the case that, you know, there's been an earnings recession in the majority of the market for a couple of years right now. And how does that work its way through in terms of what works in the market from here?
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C
Well, to a large grade, I think you're right. But when we define the market, we have to talk about whether we're, we're addressing the cap weighted indexes, which are biased obviously by the largest names, the 10 largest representing 40% of the index. That's where earnings growth has been much stronger. So yes, it's been a support for, for this concentrated market that we have seen. When you go down the cap spectrum. What's also interesting though, is just in terms of the cohorts, in terms of investors that are driving this market, the retail trader being paramount among them, and their trafficking in areas like the meme stocks and nonprofitable tech and, you know, quantum baskets. I track a lot of these baskets, many of which are Goldman Sachs baskets. So I think you have a bit of a bifurcation where there's been leadership up the cap spectrum justified by much stronger fundamentals inclusive of earnings. Yet there's still a cohort that's now been trading well down that quality spectrum into those nonprofitable areas. It really depends on what cohort you're talking about.
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A
Right. In terms of small caps, though, and there might be some overlap between small caps and some of the areas that you're talking about in terms of sort of the mean related stocks. We are seeing records at this point point the valuations are a discount, you know, relatively speaking to the S&P 500. Is that where you would reckon, Is that where the opportunity is?
- [30:11]
C
Well, be careful especially if you're talking about an index like the Russell 2000 that doesn't have 2000 stocks in it, but not far below that 1800 and change stocks. That's a wide universe and I wouldn't look at it with a monolithic lens. What I would suggest, given that the Russell is outperforming the S&P 600. Now the S&P 600, another small cap index, S and P uses a profitability filter, Russell does not. So you have an inherently lower quality index. But the reality is that some of those lower quality areas are outperforming, I'd say for longer term investors and I'll use traders lingo here, I think you want to fade the really low quality kind of stuff that's working, but lean into higher quality which I think becomes more important from a fundamental perspective as you go down the cap spectrum.
- [30:59]
D
Liz Ann, you were about to hit hit three years for this bull market. Presumably we call 2022 a bear market that preceded it. And we're about to get or we're in the midst of the second round of Fed rate cuts and the market is completely baking in that this is sort of a second soft landing we're executing in in a year's time. Is that all plausible? Do you think that these Fed rate cuts, however many you think there are going to be, will refresh the economy or give the market what it needs. How do you think about that, those things?
- [31:28]
C
Well, you know, I have some skepticism about lower rates being the elixir to where we ail in terms of the economy. I think it's policy related instability and uncertainty. You know, I mentioned earlier the downward revision to NIPA profits, which are broader measures of profits and the worst hit area was wholesale trade and that had the biggest profits drop in the history of that data going back to 2007. So you do have to fine tooth comb this to see where there are sort of kinks in this otherwise beneficial story. So I think, you know, Fed cuts, all else equal, are not a negative. But we're not dealing with, you know, a plumbing problem inside the financial system or the fact that credit has been incredibly constrained or that overall financial conditions are overly tight. So it's more on the margin. I think what is not priced in is if the Fed has to do an about face say because inflation really starts to pick up from here year and they either have to pause or shift toward tighter monetary policy. Not our base case, but we're paid to also assess the risks and I think that would be one of them. On the other end of the spectrum, I think the market is pricing in some slower growth and the ability for the Fed to continue to ease or recession conditions to look more likely. Not right now. I don't think that's priced into the market either.
- [32:53]
A
How, how big of a risk though Liz Ann, in your view is the case that the Fed has to reverse course or even just hold and not get any further? Because that would also be, you know, a surprise to the markets which are baking in a lot at this point.
- [33:07]
C
I think the bond market will tell us that will dictate that same exact thing that happened last fall when the fed cut by 100 bips over the course of three meetings. And you saw a similar move, almost an exact move on the upside in the 10 year yield which feeds more directly into things like mortgage rates. There's more of a correlation between the equity market and longer term yield. So that's what I would watch to get us sense of whether the Fed might be caught offside. A shift to tighter monetary policy. I don't think that's very likely, but I think you have to assume that there could be a case made for the Fed having to pause rate cuts if you get that for the real acceleration in inflation. But we're not going to get the inflation data because that's also put out by the BLS until the government opens back up.
- [33:50]
A
Well Zan, thanks. Good to see you. Liz Ann Saunders, Good to see you too.
- [33:54]
D
All right, coming up, open air holding a beauty contest, but it's not for the face of the next chat bot companion. What the startup is looking for and why is Next open? I may have just unveiled a nearly trillion dollar plan to expand its infrastructure footprint. But behind the scenes it's been running a secretive competition to pick its next data center sites. Mackenzie Seagallos has the details in today's tech check. Mac.
- [34:17]
E
Hey Mike. So cloud compute is not enough anymore. OpenAI has maxed out what it can get from the hyperscalers and I'm now learning that since January they have been running a stealth site search. This high stakes competition has drawn more than 800 proposals from across North America. About 20 sites are now in late stage diligence with large tracts of land under review in the Southwest, Midwest, and increasingly the Southeast, where Metta also has a $10 billion buildout underway in Louisiana. Now, I spoke exclusively with Metta alum Keith Hyde. He is now Sam Altman's right hand man for this infrastructure push. He told me the applicants range from solar farms to nuclear startups and legacy utilities, all vying to host the next wave of Stargate data centers. Now, I reviewed the request for proposal myself and the core criteria come down to three things. Access to power, ability to scale and local buy in. Now, getting a diverse power mix is really key to OpenAI strategy. Some proposals involve solar power paired with batteries. Others tap into legacy grid assets like refurbishing old gas turbines or plugging into decades old substations. And then there are some that are pitching Open air on small modular nuclear reactors. So each site looks different, but the goal is the same. Abundant, fast and local energy. OpenAI is also shifting toward building, building that physical infrastructure itself, betting that more GPUs online will help them stay ahead of their rivals.
- [35:43]
D
Guys, Mac, I guess I'm trying to keep straight like how much OpenAI is doing itself, what its partners are doing with its, you know, the orders from Open Air. And it's a credible matrix of a rush of capital towards scarce resources. So are they competing against their, their partners with some of this?
- [36:03]
E
It's such a great question. So let's start there. And the point of this whole first party build itself is something that Sarah Fryer spoke to me about last week, that they want to understand what the margins are so that one, they have leverage when they negotiate with third party infrastructure players. But two, so that they know how much prices are being inflated when they go to sign deals with a partner like Oracle, for example. And then the second piece to this is the fact that there is a 17 gigawatt commitment that they need to honor and that 10 gigawatt piece within video is something where they need to find the infrastructure themselves. And that is what Keith Hyde is overseeing. He's going out to multiple parties across the continent, primarily in North America. I asked about some of the commitments in the Middle east, but we're really seeing a push here in, in the US especially to get the build done here. And then on the other 7 GW Oracle is helping them fill in the gap. But this is unprecedented because historically they've gone through Microsoft Azure or Google Cloud to get that compute need served.
- [37:01]
A
Is there a preference Mac, in terms of what kind of power they use? I'm just trying to understand sort of the, the ancillary trades that go along with this?
- [37:09]
E
Well, I mean with renewables the problem is that it just isn't enough power. So nuclear, you've got one power plant translating to 1 gigawatt. So that fills is a pretty large gap. But there's limited access to this right now and bringing new reactors online is a ten year time horizon. So it's not a realistic solution to this problem. I will say in terms of this first party infrastructure build strategy, it's something that they've just sprung up themselves in Texas, so they are trying that out. But it's a mix of things. You've got hydropower up in Washington State. They're looking for any source of power they can get and they are fine to piecemeal that effort out across multiple players. Hence this whole rfp. Looking for a wide call.
- [37:47]
A
Mac. Thanks mackenzie. Seagallos Coming up, EV sales surging last quarter ahead of that tax credit expiration. But there are signs the shift away from combustion engines could stick the automakers poised to cash in on that trend. Next the exchange. Be right back. Welcome back. It's been a rough week for the EV makers after the tax credit expired on Tuesday. Tesla lower by more than 4% while revision is down about 14% after trimming in its delivery outlook. But there were a few bright spots in the third quarter sales numbers. Phil LeBeau joins us now with that story. Phil?
- [38:21]
B
Hey Melissa, don't go anywhere. I have a question for you because I'm going to answer this. At the end of this, I want you to think about what percentage of all US sales, all vehicles in the third quarter, not just EVs, were by the big three, the traditional big three, GM, Ford and Stellantis, what we call the Detroit Auto Company. I want you to think about that, tell Mike and then you'll see at the end whether or not you're right. Let's take a look at the EV market before we answer that question. And when you look at the EV market, it is still dominated by Tesla year to date. And this is according to Motor Intelligence, which crunches all of the sales data for every single model. 43.1% of the vehicles sold this year in the United States have been sold by Tesla. GM has been increasing its EV sales. That's up to 13.8%. And for Tesla, it's all about the Model Y. Yes, the Model 3 is also a big seller. And then you have the S and the X and the cybertruck. But really the Model Y, it is the straw that stirs the drink 26% of all U.S. eV sales, not just Tesla sales. All U.S. eV sales are. The Model Y helps that the base price is under $50,000, which is where people want to access the EV market right now. Now, in terms of financials, we'll get them on October 22nd as you take a look at shares of Tesla. That's when we'll find out a couple of key questions. The most important, what's happening with operating margins? And second of all, how is the expansion of the robo taxi going? Of course, Elon Musk, when he's on that call, will talk about his belief that the robo taxi will blow everybody out of the water when it comes to autonomous drive vehicles, especially taxi services, rideshare services in the future. Also want to show you this. It's internal combustion engine vehicle sales versus hybrids versus EVs this year. Look, the ICE vehicles. And yes, EVs were 10.5% of the market in the third quarter. But right now, we are still predominantly an ICE vehicle country, with almost 80% of the vehicles sold here being internal combustion engine vehicles. And finally, in answer to the question I asked you at the top, Melissa, Melissa, take a look at shares of gm, Ford and Stellantis. The reason we ask you to take a look at this is the US share for these companies, the traditional big three is now 38%. 38% in the third quarter. Melissa, is that what you thought it was going to be?
- [40:43]
A
I actually thought the question was different, so I completely got it wrong. But 38% makes, based on how you.
- [40:50]
D
Set it up, Phil, I thought maybe it was even lower than 38%, but that is remarkable. Remarkable.
- [40:54]
A
Yeah.
- [40:56]
B
Most people I asked that question to today.
- [40:58]
D
Yeah.
- [40:58]
H
Yeah.
- [40:59]
B
When I asked people, whether in the industry or friends, I brought this up after the numbers were crunched and Almost everybody said 32, 33%.
- [41:06]
D
Yeah.
- [41:06]
B
So 38%. You're not alone in thinking it was going to be lower.
- [41:10]
A
All right, Phil, thanks.
- [41:12]
B
You bet.
- [41:13]
D
Coming up, streamers, spending, and a showgirl. All that and more coming up in today's Rapid Fire, the Exchange. Exchange to be right back.
- [41:22]
A
Welcome back to the Exchange. Let's catch you up on a few stories on our radar. Time for Rapid Fire. First up, Netflix on pace for its worst week since April, down about 5%. Elon Musk posting on X earlier this week, cancel Netflix in response to a post claiming the streamer quote openly boasts about discriminating against white people. Musk also taking issue with an animated show which was canceled back in 2023, featuring LGBTQ characters and its its creator, the Tesla CEO has kept the post coming since Wednesday with a high profile conservative activist jumping into the fray last night. So far Netflix has not responded to this. Not sure if it's directly related to this canceled Netflix push, but yeah, yeah.
- [42:03]
D
I mean the stock is definitely on the defensive. The other thing though is it kind of poked above like 40 times earnings. It's even much more expensive than like Microsoft and Amazon. So if there's any idea there might be some churn whether for this reason or others subscribers, I guess it's enough to take it off the boil.
- [42:16]
A
It's got 301 million subscribers globally though, so it would have to be a real dent, no doubt. Next up, bank of America calling AI the elephant in the room when it comes to emerging markets writing countries like China, Korea, Singapore and Taiwan could benefit if AI boosts global growth, as that could warrant tighter M spreads. But that impact will ultimately depend on whether AI boosts the US dollar. I think it all goes back to the dollar weak dollar good for emerging markets.
- [42:44]
D
Exactly. Those rules haven't changed and and has not boosted the US dollar today, certainly not this year. So at this point, and look, Taiwan semi is the single biggest stock in the emerging markets index.
- [42:55]
A
Topic 3 TD Cowan lowering estimates and price targets on a number of restaurant stocks including Kava, Chipotle, Shake Shack and Starbucks. The firm seeing weakness in four key demographics, young people, liberal liberals, low income consumers and Hispanic customers. But with restaurant stocks under pressure recently, TD says there are opportunities over the next year, calling current challenges cyclical and not structural. It's interesting that liberals is a demographic group.
- [43:20]
D
Yes, well I thought that was kind of. I imagine there's some overlap among those four groups. But, but I mean just the general idea of, you know, price sensitivity, maybe some fatigue with certain concepts. A lot of the office lunch places like Sweet Green have really, really suffered as well.
- [43:35]
A
They are expensive.
- [43:36]
D
Yes, exactly.
- [43:37]
A
Kava Sweet green All is 20 bucks.
- [43:39]
D
And there was initially some excitement about maybe these new formats and kava and things like that and that seems to have cooled off.
- [43:46]
A
TD though still likes fast casual as they think that's where the growth is going to be. Still. All right, topic four and I know Mike is a swiftie, so Taylor Swift sings she Isn't Bulletproof in her song Tell Me why, but she apparently is tariff proof. The 35 year old pop star releasing her 12th original studio album Life of a Showgirl today. And fans won't have to pay any extra duties as vinyl records, CDs and cassettes were spared from the Trump administration's rollback of the de minimis exemption back in August. Who knew?
- [44:16]
D
Due to an old law.
- [44:17]
A
Due to an old law, yes.
- [44:18]
D
That deals with information products, which made me immediately think of, you know, the threatened tariffs on movies made overseas. Would it apply to those things? Things? I don't know. It seems to me as the dad of a, of a hardcore swifty, I don't know that the tariff charges would have impacted sales necessarily.
- [44:36]
A
I think that easily they could have, you know, charged twice five of the.
- [44:39]
D
Top ten physical albums. Taylor Swift last year.
- [44:43]
A
Wow, what a stat.
- [44:44]
D
Those are our final thoughts. All right, that's it for us. Thanks a lot for watching the exchange. Power lunch starts now.
- [44:51]
A
What made you confident that you could do something that hadn't been done done before? I have no fear of failure.
- [44:57]
G
Trailblazing women, changing the game.
- [45:00]
A
One of my favorite pieces of advice, think about what your boss's boss needs. Leadership can look in many, many different forms. It really does come down to just trusting yourself. Life is short and you just gotta.
- [45:11]
C
Think big to accomplish big things.
- [45:13]
G
Julia Boorstin hosts CNBC Changemakers and Power Players. New episodes every Tuesday. Wherever you get your podcasts.