The Exchange — Data Dearth, Gambling Lows, and Tariff-Proof Taylor

CNBC | October 3, 2025
Hosts: Mike Santoli, Melissa Lee
Highlighted Guests: Andy Challenger (Challenger, Gray & Christmas), David Katz (Jefferies), Liz Ann Sonders (Charles Schwab), Emily Wilkins (CNBC), Mackenzie Sigalos (CNBC Tech Check), Phil LeBeau (CNBC)

Episode Overview

This episode covers the impact of the ongoing government shutdown on the markets—particularly the absence of major economic data like the jobs report—and explores market rotation into small caps, labor market concerns, volatility in gambling stocks, health care outperformance, the evolving landscape for data centers, trends in EV and ICE car sales, and some rapid-fire segments including the unique tariff situation for Taylor Swift's new album.
The tone throughout is analytical, conversational, and market-focused, with touches of wit and rapid insight.

Key Discussion Points & Insights

1. Market Update: Shutdown & All-Time Highs

Segment [00:50]–[02:37]

• Major indices closed at new all-time highs despite the government shutdown and lack of economic data (notably, no jobs report). The Russell 2000 small cap index is also at a record, outperforming with a +1.5% gain.
• Risk assets like microcaps and cryptocurrencies surged; Bitcoin approached its all-time high.
• Mega-cap stocks: Tesla and Palantir were notable laggards, with Tesla giving back part of its previous 33% rally.

Notable Quotes:

• "The equity markets acting like bad news on ISM services is kind of good news because it makes the Fed easier ... It just feels as if it kind of fits in with the risk seeking mode."
  — Mike Santoli [01:42]

2. Labor Market: Data Dearth and Cooling Trends

Segment [02:37]–[09:51]
Guest: Andy Challenger, Challenger, Gray & Christmas

• Job layoffs: Layoff announcements in September fell 37% month-over-month but are up 55% year-over-year—the highest since 2020.
• Persistent cooling: The labor market has been gradually cooling for over two years; elevated layoffs continue even outside recession periods.
• Corporate behavior: Many job cuts are now being linked to automation/AI, not just business cycle factors.
• Hiring drought: September saw the lowest YTD hiring plans since 2009. Firms remain hesitant to hire, with only tepid announcements even for the future.

Notable Quotes:

• "We're expecting to stay quite busy through the end of the year and into next year, in fact, are preparing for an acceleration."
  — Andy Challenger [03:02]

• "Layoffs beget layoffs ... more companies continue to cut, that can further erode consumer spending, confidence companies have, and lead to more layoffs."
  — Andy Challenger [05:36]

3. Stock Focus: Apple’s Sideways Prospects

Segment [09:55]–[11:29]

• Apple received a rare downgrade to ‘sell’ from Jefferies (one of only three such ratings), citing overoptimistic expectations for the iPhone 17 and for next year’s foldable device.
• Demand growth is mostly from the lower-priced base model, not premium SKUs.

Notable Quotes:

• "The lower base model is fueling the demand here. The higher margin models, they're not in demand as much."
  — Melissa Lee [10:25]
• "I don't know if you want a foldable phone."
  — Melissa Lee [11:06]

4. Betting Stocks Stumble in Crowded Market

Segment [12:28]–[17:59]
Guest: David Katz, Jefferies

• DraftKings (-15% this week) and Flutter (-9%) suffer as new entrants like Kalshi intensify market competition and regulatory wrangling.
• Robinhood-Kalshi partnership: A broker-analyst favorite, but the products are “primitive” versus existing sports books.
• Regulation as bottleneck: The main reason for legacy operators’ caution is legal ambiguity; when the dust settles, big incumbents like DraftKings should regain dominance.
• Trial, not loyalty: Casual, new bettors might experiment with alternative platforms, but true volume remains tied to in-play betting—currently the stronghold of established, regulated operators.

Notable Quotes:

• "What they're flourishing in is this debate ... about the legality of swap contracts ... [but] if we could get to a legal conclusion, the likes of DraftKings and FanDuel ... would perform very well, frankly quite a bit better than what Kalshi has."
  — David Katz [13:15]

5. Health Care Sector: Rally & Rotations

Segment [18:51]–[20:36]

• Health care stocks have surged 7% since Monday, marking their best week in over three years.
• Johnson & Johnson saw upgrades and all-time highs.
• Biotech and microcap biotech: Outperformed lately as risk appetite increases.
• Return of defensive sectors: Possibly a catch-up move after a period of underperformance vs. staples and risk sectors.

Notable Quotes:

• "One of the big market stories of the week is how health care has come roaring off the mat ... maybe this downtrend line has been broken."
  — Mike Santoli [18:54]

6. Government Shutdown: Political & Market Ramifications

Segment [22:22]–[26:38]
Reporter: Emily Wilkins (D.C.)

• Third day of shutdown: Senate fails to reach an agreement on funding; procedural wrangling continues.
• Key issues at play: Health care premium tax credits for 24 million Americans could lapse (premiums could rise 75% for some).
• Political bargaining: Both parties signal willingness for a deal but disagree over sequencing (funding first vs. guarantees on tax credits).
• White House maneuvers: Pullbacks on program funding and targeted pressure are adding to the policy mix and complexity.

Notable Quotes:

• "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..."
  — Emily Wilkins [24:25]

7. Earnings Season Preview: Data Uncertainty & Market Risks

Segment [26:38]–[33:50]
Guest: Liz Ann Sonders (Charles Schwab)

• Higher expectations: With less government data, earnings reports will be under a brighter spotlight.
• Valuations: S&P trades at 22x forward earnings, but mega-cap tech nears 30x; small caps offer relative discounts.
• Earnings bifurcation: “Magnificent 7” drive most growth; broader market remains tepid and may even be in an ‘earnings recession.’
• Market narrative: Retail traders have pushed both meme and nonprofitable tech stocks amidst this divide.
• Fed rate cuts: Markets expect ongoing rate cuts and a “soft landing,” but Sonders is skeptical about cuts being a cure-all, especially if inflation picks up and the Fed must pause (or even reverse) rate cuts.
• Risk: The main underappreciated risk is a sudden return of inflation, which could alter the Fed’s current trajectory.

Notable Quotes:

• "There’s been leadership up the cap spectrum justified by much stronger fundamentals ... Yet there's still a cohort ... trading well down that quality spectrum into those nonprofitable areas."
  — Liz Ann Sonders [28:44]

• "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."
  — Liz Ann Sonders [31:27]

8. Big Tech: The Secretive Data Center Race

Segment [33:54]–[37:47]
Report: Mackenzie Sigalos

• OpenAI’s infrastructure push: OpenAI is conducting a secretive beauty contest for its next round of mega data centers—over 800 proposals, 20 finalists—in North America.
• Key selection criteria: Power access, ability to scale, and local buy-in.
• Emerging trends: Innovative proposals include renewable plus battery, retrofitting old assets, and even nuclear options—amid a continental arms race for compute.
• Strategy shift: OpenAI now aims to directly build some infrastructure, both for cost leverage and availability, and to stay ahead of rivals.

Notable Quotes:

• "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."
  — Mackenzie Sigalos [35:42]

9. EVs, ICEs, and Market Shares

Segment [38:20]–[41:09]
Reporter: Phil LeBeau

• EV market: Tesla holds 43% of US EV share; GM is rising (13.8% EV share).
• Model Y: 26% of all US EV sales; base price (sub-$50K) drives demand.
• Market context: Despite EV growth (10.5% of new sales), ICE vehicles are nearly 80% of the market.
• Big Three shifting: US market share for GM, Ford, Stellantis is now just 38%. Many thought it would have fallen even further.

Notable Quotes:

• "Right now, we are still predominantly an ICE vehicle country, with almost 80% of the vehicles sold here being internal combustion engine vehicles."
  — Phil LeBeau [39:48]

• "The US share for these companies, the traditional big three is now 38% ... Most people ... thought it was going to be lower."
  — Phil LeBeau [40:54]

10. Rapid Fire: Netflix Controversy, AI in Emerging Markets, Restaurant Paradox, Taylor Swift, and More

Segment [41:22]–[44:44]

• Netflix under fire: Stock drops ~5%—Elon Musk’s campaign and valuation concerns both cited as factors.
• AI & EM: Bank of America notes AI could benefit Asian EM economies if it drives growth and a weaker US dollar, but the dollar hasn’t weakened so far.
• Restaurant sector: TD Cowen downgrades multiple fast casuals (Kava, Chipotle, Starbucks); hardships noted among young, liberal, low income, and Hispanic demographics, but calls the challenge “cyclical, not structural.”
• Taylor Swift: Her new album, Life of a Showgirl, is “tariff-proof” thanks to decades-old rules on music media—fans won’t pay Trump’s new tariffs.

Notable Quotes:

• "Taylor Swift sings she isn't bulletproof ... but she apparently is tariff proof."
  — Melissa Lee [44:13]

Notable Quotes & Memorable Moments

On the shutdown and data drought:
"It is jobs Friday, except there's no data today due to the government shutdown."
— Melissa Lee [02:37]

On layoffs and labor market risk:
"If more companies continue to cut, that can further erode consumer spending, confidence companies have, and lead to more layoffs."
— Andy Challenger [05:36]

On Apple downgrade:
"I don't know if you want a foldable phone."
— Melissa Lee [11:06]

On gambling market myths:
"What they're flourishing in is this debate ... about the legality of swap contracts ... [But] if we could get to a legal conclusion, the likes of DraftKings and FanDuel would perform very well, frankly quite a bit better than what Kalshi has."
— David Katz [13:15]

On OpenAI’s data center ambitions:
"OpenAI is ... betting that more GPUs online will help them stay ahead of their rivals."
— Mackenzie Sigalos [35:42]

On the growing divide in market leadership:
"There’s been leadership up the cap spectrum justified by much stronger fundamentals ... Yet there's still a cohort ... trading well down that quality spectrum into those nonprofitable areas."
— Liz Ann Sonders [28:44]

Timestamps for Important Segments

• [00:50]–[02:37]: Market and risk asset update during the shutdown
• [02:37]–[09:51]: Labor market deep dive with Andy Challenger
• [09:55]–[11:29]: Apple’s downgrade and the iPhone cycle
• [12:28]–[17:59]: Gambling market, DraftKings, and Kalshi with David Katz
• [18:51]–[20:36]: Health care sector rally and market rotation
• [22:22]–[26:38]: Government shutdown negotiations and implications
• [26:38]–[33:50]: Earnings season preview and Fed policy with Liz Ann Sonders
• [33:54]–[37:47]: The OpenAI data center "beauty contest"
• [38:20]–[41:09]: US EV vs. ICE market with Phil LeBeau
• [41:22]–[44:44]: Rapid Fire news: Netflix, AI & EM, food service, Taylor Swift tariff-proof album

Tone and Takeaways

The hosts maintain a quick, data-driven, and approachable tone, frequently highlighting the oddities of a market thriving amid macroeconomic uncertainty and data scarcity. Guest experts bring a cautious but not alarmist perspective, especially on labor and earnings, while providing actionable distinctions between long-term market fundamentals and short-term trends.

This episode serves as a sharp snapshot of a market in flux—navigating missing data, sector rotations, regulatory surprises, and even how pop culture can intersect with economic policy.