Marketplace - How's the stock market doing, minus AI?

Episode Date: October 7, 2026

The S&P 500 has hit more than two dozen record highs this year, and it’s got AI firms to thank. In fact, it’s easy to forget that a lot of other public companies are in a tough spot. In this episode, why there’s a widening bifurcation of the stock market. Plus: Rising auto loan delinquencies could be a warning sign for broader consumer strife, financial institutions kick off Q3 earnings season, and Kai explains what the yield curve tells us about the bond market.Every story has an economic angle. Want some in your inbox? Subscribe to our daily or weekly newsletter.Marketplace is more than a radio show. Check out our original reporting and financial literacy content at marketplace.org — and consider making an investment in our future.Read the stories in today’s episode:The stock market gap between AI and everything else is growingWhat to watch for in next week's Q3 earnings"Circular spaghetti": What the tangled AI supply chain means for regulationWant to know what the bond market is thinking? Check out the yield curveRising auto loan delinquencies reflect the K-shaped economy

Okay, wait, maybe I've been totally wrong? From American public media, this is Marketplace. In Los Angeles, I'm Kai Rizzdahl. It is Wednesday. Today, this one is the 7th of October good, as it always is. To have you along, everybody. I have been saying for a very long time on this program that the stock market is not the economy. I have, and this is true, I have a sweatshirt at home in my closet that says that on it.

So believe me when I tell you that the words that are about to come out of my mouth hurt. It is possible, possible, that the stock market is, right now anyway, the economy. Stocks are an ever-increasing share of total household wealth in this country. That wealth effect, it's called, is real, and so consumers spend more, even consumers who don't own stocks. GDP is being driven in no small part by the zillions of dollars being spent on AI and those companies' valuations are driving stocks higher. So all of that is happening. The catch is that of the 500 big companies listed in the S&P 500, like seven of them have been driving it to record highs. The other 493 or whatever, marketplaces for Brayneeshore starts things

off. All right, let's take out the Nvidia, the Microsoft, the Amazon, the Micron. We know they're doing great, so happy for them. How, though, is everybody else doing? Not so great right now. Matt Orton is chief market strategist at Raymond James Investment Management. When the S&P 500 hit its latest record high on Tuesday, only 24 stocks actually hit highs for the year. 24 out of 500. There's a significant bifurcation between everything that's tech and artificial intelligence versus everything else in the market. It wasn't this serious even a few months ago. Matthew Paniotti is a senior research analyst at Capital Advisors Group. All the good performance was weighted to the bottom companies, not to the MAG7, not to the AI names, but to these other guys.

We were kind of catching up. And then things changed. The chair of the Federal Reserve gave a big press conference in August, strongly suggesting interest rates were probably. probably going to be going up. It became clear that the Fed was going to start raising rates. Then all those companies and all those sectors that were doing well kind of up until that point flipped over. And while the AI trade started ripping, these guys have kind of been struggling.

And interest rates did go up. And mortgage rates went up. And bond yields went up. Also the price of diesel went up for normal non-tech companies living down here on earth. These are all bad things. There are businesses that are tied to, say, the housing market with, mortgage rates at now more elevated levels, it's not surprising that we've seen investors rotate out of that area.

David Lefkowitz is head of U.S. equities at UBS. Homebuilder Linar is down 27 percent this year. DoorDash, down 13 percent. Tyson Foods down 12 percent. There are parts of the stock market that are correlated to interest rates and to oil prices. And for those businesses, they're probably experiencing some challenges. AI investment, though.

does not seem to care about any of that for now. In New York, I'm Subrey Beneshire for Marketplace. It is a truism, by the way, of business journalism that no sooner do you assign a story in the morning news meeting about this stock index or that stock index being at record highs, then traders on Wall Street decide to ruin your day. All three major indices took a hit on this Wednesday. Bond yields, though, went up, which makes the story on the yield curve that's coming up in a little bit all the more topical. we will have the details when we do the numbers. Just to be clear here, I'm not totally giving up on that.

The stock market is not the economy thing. Call it a, I don't know, temporary hiatus or something. Anyway, all market eyes will turn to corporate earnings season next week, starting with big banks and some consumer goods companies. Marketplaces Kristen Schwab has the preview. The thing about a good second quarter is that it ups the ante for quarters three and four. And in particular, that's led to higher and higher expectations. for 2026 overall.

Rob Hayworth is senior investment strategist at U.S. Bank. He says Q2 had some splashy events like the IPO of SpaceX. Q3 has been marked by spiking oil prices and an interest rate hike. And to understand how it's all affecting companies, we won't have to wait long for answers. The biggest names remain the most important, but also the early reporters are quite instructive. Banks usually lead earnings season. other financial institutions follow close behind. Alexander Yocum is a banking analyst at CFRA research.

You know, maybe Capital One is your best benchmark. You know, a player like America Express, if you're kind of curious, you know, who's the high-end consumer, I think that's sort of your place to go. And then on the banking side, maybe like a Wells Fargo is sort of a good barometer. He says banks give us a pretty complete picture of how businesses are doing, how consumers are doing. Companies are going to say the consumer is fine for now. But then the future outlook, I do think sentiment will be down. Rising interest rates could slow lending and encourage more saving, which banks don't love.

They'd earn less interest and pay more out. If you really want to drill down into understanding how consumers are doing, though, you've got to wait for reports from companies like Procter & Gamble and Kraft Hines. Aaron Lash, director of consumer equity research at Morningstar, says, yeah, that means picking apart the big numbers, revenue and income and cash flow, but the little numbers can be especially instructive. If a consumer has less dollars to spend, maybe they aren't using as much shampoo. Maybe they aren't at the height of the great financial crisis. We saw this. They weren't using as much toilet paper, believe it or not. Shampoo and toilet paper as key economic indicators? Why not? I'm Kristen Schwab for Marketplace.

So there's this morally binding, President Trump says, agreement that the big AI companies have signed to voluntarily regulate themselves. Well, we're all going to have to wait to see how that plays out in real life. The actual fact of the matter is that hundreds of billions of dollars are still being poured into that technology and the infrastructure to run it. And that is a supply chain issue. David Gray Witter is an assistant professor in the School of Information at the University of Texas, Austin, where he studies the AI supply chain and how the people in it think about the systems that they are creating. Professor Witter, welcome to the program. Great to be here. Would you do me a favor just so we all have the same ground truth here and give us like a 30 second primer, maybe 45 if you need to, on the artificial intelligence supply chain right now?

Yeah, everyone's talking about AI. and the AI supply chain is basically a way of thinking past that hype into the specific people building different parts of the of AI. We have Nvidia designing chips that they pass to TSMC to build. And we have Google Microsoft, Amazon buying those chips. And then we have model labs building models using the cloud compute. And I can go on. Well, let's just, I'll short circuit the going on by just pointing out that it is somewhat circular, this supply chain. Everybody's sort of in bed with everybody else.

Yeah, it is. It is. I mean, we have Nvidia investing in their customers, and then they buy more Nvidia chips. We have Google, Microsoft, Amazon running startup incubator programs, and then they have to use their cloud compute, the startups. Right. I mean, there's Open AI, I believe, a lot of it is in underwriting finance for different data center projects, and that comes together in very convoluted deals. It's a mess. It's a circular spaghetti. It's a circular spaghetti. Okay. Now, frame that whole circle. or spaghetti thing for me in the context of what is now in the news about AI, this drive-thru, possibly slow down, regulate in some way. How does the supply chain handle that?

It doesn't. And that's kind of the problem. Great. The issue with the supply chain, remember way back when Nike got in trouble for using child labor in supply chain? And their answer was something like, well, we told our contractor who makes the shoes not to use child labor, that's not my problem. And people are like, no, I don't buy that. And so we have a similar dynamic going on where there are known harms about AI, as well as these like, uh-oh, it might end the world. And we have this collective action problem where it has been framed such that everyone would have to act together in order to avert these harms. Setting aside for a second, the fact that Congress doesn't know what date is, let alone can't regulate something as fast. moving and as complicated as artificial intelligence, it is worth pointing out here that there are

hundreds of billions of dollars in sunk costs already. There are trillions more on the way. And so this collective action problem is complicated by the very realities of that circular supply chain that we talked about up at the top of this interview. Yeah. Let's go back a little bit. I think there's an important way of realizing how different supply chain actors are allies when it comes to certain concerns and competitors when it comes to others. So, Invidia, Google, Microsoft, Amazon, TSM, they all have an interest in AI being more broadly used. But invidia would like to remain the dominant chip designer, but Google, Microsoft, and Amazon make up two-thirds about of the cloud compute market and

therefore a large proportion of Nvidia's market share. Meanwhile, Google doesn't like being dependent on Nvidia for its chips. So they're, you know, building TPUs, sensor processing units, and other ways of trying to make themselves less dependent on

Nvidia chips. Right. So fundamentally a lot of these players in the supply chain, it's, I love you, I hate you, I love you, I hate you, right? Yeah, exactly. Right. Exactly. Right. So at the end of the day then, as a guy who is immersed in this, certainly more than the average layperson, are you optimistic or pessimistic

about our ability to get a hold of what AI is doing and that the supply chain and the market dynamics will actually have any influence? I think I think I kind of try and start by looking at what the American public thinks. And if you look at the polling, the average American, unless they make more than $200,000 a year or personally helping build AI, is not optimistic that AI will benefit them. And I think that is a good set of starting points for increasing regulation. I want to make sure that regulation isn't just banning data centers, but goes beyond that to actually engage in with the circularity we're talking about, the systemic power. of some of these companies. I think there's more finely tuned ways of doing it, I guess.

Yeah. You sound, if you don't mind my saying it, a tad bit dispirited. Um, I mean, I, there's a joke among some professors I've talked to lately that some people study things they love and some people study things they hate and both are super motivating. And I, you know, you can't see my hands right now, but the way I explain my position, to folks is AI thumbs up, AI good, concentrated corporate power bad. But right now, AI depends on concentrated corporate power. And I hope to help imagine a way out of that. David Gray-Witter

at the University of Texas, Austin. Professor, thanks for your time, sir. I appreciate it. Thank you for yours. Have a good day. Coming up. Maybe you pack your own lunch. Maybe you don't go to a movie. Summer's over, kids. First, though, let's do the numbers. Dow Industrials gave back 341 points on the day. Two-thirds of 1% 51,179. The NASDAQ down 61 points, about two-tenths percent, 27,538.

The S&P 500 down 17 points, also two-tenths percent, 7801. Here's a number for you. 7.49 percent. That's the average rate on a 30-year fixed mortgage as of last week. The Mortgage Bankers Association gave us that number today. Highest has been in almost three years. Rocket companies, their mortgage lender grew up, gave up, rather, 1 in 3 tenths percent. UWM Holdings, that's United Wholesale mortgage, plunged 5 and 8 tenths of 1% on the day.

Bonds closed basically level, though there was a big intraday spike in the yield. 10-year, about 5.28% you're listening to Marketplace. This is Marketplace. I'm Kai Risdahl. If you're one of those people who listen all the way to the end of the numbers, first of all, thank you. Second, though, as you were heard, the yield on the tenure treasury today continues to hold near its highs. Given that, we're going to spend another couple of minutes on bonds. This time something called the yield curve.

Megan Swiber is the managing director of U.S. Rates Strategy at Bank of America Merrill Lynch. Thanks for coming on the program. Thanks for having me. For the unfamiliar and in lay person's terms, please. please. What is a yield curve? A yield curve is really how the market's expecting Fed policy rates to evolve over time. So if the market is expecting the Fed to hike, we're going to see front end rates move up in the yield curve. If the market's expecting, front end meaning like short term, like a couple of year notes and stuff like that. Exactly, meaning like over the next two years or so.

And if the market's expecting the Fed to need to hike, more aggressively and stay at those rate levels for a long period of time, that's going to impact 10-year and 30-year interest rates. And so the market response that we've seen over the past couple months has been both of those two things. We always say on this program that the bond market can tell you where the economy's going. So what does the bond market tell you as the bond market and rates professional in this conversation? The bond market's telling us that the U.S. economy is extremely resilient to higher borrowing costs. We have a Fed right now that is hiking and on a trajectory to continue hiking because inflation has been a problem in the U.S.

And so the sell-off, the increase that we've seen in yields across the curve is really telling us that it's going to take much higher interest rates for the Fed to be able to achieve its 2% inflation target. All right. So a couple of things. things in there that I want to take part. First of which is yields, that is the rates that bonds pay, those yields have gone up a relatively large amount in a relatively short period of time. You worried about that? So historically, we would be worried about that. We'd be worried about a large rate sell-off having impacts on the equity market, having impacts on banks. But what we've seen is that the equity market continues to hit new highs. So it's not

yet worrying to the Fed. The Fed has certainly come out in recent weeks and suggested that they're going to take their time on hikes. But really what the market's watching is the inflation data that we'll get next week. If it comes in quite hot, it's going to tell the Fed that really time is not on your side and you have to be delivering on these hikes faster and faster than what the market's pricing right now. At the risk of dragging us down into the weeds, a couple of weeks ago, the phrase inverted yield curve started popping up. What is that and does it matter and should I be worried about it? So inverted yield curve is when shorter term rates are moving up more than longer term rates. This is not really a situation that we've seen in recent weeks

in the U.S. rates market, but an inverted yield curve tends to send alarm signals in the media up because historically there has been some precedent where inverted yield curves suggests that a recession is looming. But what an inverted yield curve really says to a rates person is that the market's expecting the Fed to take policy rates above where the market thinks longer-term neutral rate sets. And neutral is kind of like the equilibrium rate for the economy. With the understanding that you're a rates person and not a media critic, just because of what you were just talking about. Do you think we're spending, we, the business and economic media, are we spending too much time on bonds right now? No, we're not. There's never, there's never

too much focus on the bond market, of course. But really what's going on here is very interesting, right? And we've hit these rate levels that we haven't seen in a lot of a lot of folks' time span on the street, right? These are levels that we haven't seen since pre-global financial crisis. Now, what the market's really contending with is not just these higher interest rates, but these higher growth assumptions. And you can just see that from GDP forecasts that everyone's coming up with for the U.S. economy, right? Growth continues to be so resilient in the U.S., and that's a big part of what's going on right now, too. Are you enjoying your time in the spotlight here? You know, it's always fun to talk about bonds.

I personally started my career at the Fed, so this has been a quintessential interest of mine. over decades now. So it's great to be able to help people understand these things and always appreciate it. Always is. Megan Swiber, she's a manager and director of U.S. Rates Strategy at Merrill Lynch Bank of America. Megan, thanks a lot. I appreciate your time. Thanks for having me on. That conversation Megan Swiber and I were just having about bonds and the yield curve, while, you know, a little bit dense, it was fundamentally about the cost. of money. And the cost of money right now is relatively high, and it seems going higher. And that, in turn, means data out from the Federal Reserve today on the amount of credit, that is the amount of debt

that consumers in this economy are carrying deserves a mention. Consumer credits of all kinds except mortgages up 1.9% in August, $5.2 trillion in aggregate consumer debt outstanding, should you happen to be curious. And maybe not surprisingly, we are starting to be to see some signs consumers are having some trouble paying things off. Household delinquency rates are higher than they were last year and the year before, so says the New York Fed. And the number of auto loans that are more than three months overdue is at levels we haven't seen since the financial crisis.

Marketplace of Justin Ho has more on that one. Payments on auto loans have been coming in later and later at LaSalle State Bank in Illinois. I'd say eight to 12 months ago we started to see people pushing that 30 days, maybe 35, days. Chris Duncan is the bank's chief lending officer. And now we're starting to see that 35 days turn into 45 days. Duncan says he pays close attention to these late payments because people tend to prioritize their auto loans. They need their cars to go to work. So if they're late on their car payments, that's a sign of a bigger issue. At that point, you're probably, you know, you're maxed out on your credit cards, you know, your savings has dwindled down. You probably don't have much of a cushion there.

Duncan says that boils down to the higher cost of living, and not just for groceries and gasoline. Jeremy Robb, chief economist at Cox Automotive, says vehicle prices have been rising too. New vehicle prices are close to $50,000. Used vehicle prices are about $27,000. Those are both up about 41% since the pandemic. Rob says that's pushed up monthly auto payments. The average payment for a new car is now $765 a month, according to Experian. And on the U-side, you've kind of seen the same thing. The average used car payment now was at about $600. And before the pandemic, that used to be $300 or $350.

And if your credit history isn't great, those payments could be a lot higher. Matt Schultz with lending trees as your credit score determines the rate you pay on your car loan. If you have excellent credit, you may get a rate of about 7.5% on a new car. loan, whereas if you have poor credit, that may be up in the 20s. Consumers with lower incomes have the hardest time paying back their auto loans. Anne Villamil, an economics professor at the University of Iowa, says they're less able to bear the rising cost of driving. Like the increase in the costs of both new and used cars, increases in costs of insurance,

increases in gas and maintenance. And since drivers can't just cut out those costs, they, cut back elsewhere. Maybe you don't go out to dinner. Maybe you pack your own lunch. Maybe you don't go to a movie. Rising auto loan delinquencies aren't likely to have a big impact on consumer spending overall, says Grace Swimmer, U.S. economists with Oxford economics. Not to say we won't see some slowdown in spending moving forward, but it'll be tens of a percentage point. Instead, Swimmer says rising auto loan delinquencies are yet more evidence of the K-shaped economy. Where those that are already struggling to make their payments are finding it increasingly difficult to bring down

their outstanding. Well, people who are able to make their payments just keep on spending. I'm Justin Howe for Marketplace. This final note on the way out today, yet another indicator that corporate fortunes can turn on the narrowest of choices. Saw this on Bloomberg today. Levi Strauss reported profits this morning. It did raise its full year expectations, but had the slowest direct-to-consumer growth in almost four years. Why, you ask? Because they're back-to-school ads concentrated on baggy jeans instead of low-rise. Our campaign was all about loose, the company's CEO said. Luce, she went on, is still a very big and important part of our business, but a lot of the excitement and energy in the market

was around low. Retail's tough, right? Our media production team includes Brian Allison, John Fokie, Montana Johnson, Drew Jaws, Dad, Gary O'Keefe, and Charlton Thorpe, Alex Simpson is the manager of media production. And I'm Kai Risdahl. We will see tomorrow, everybody. This is APM.