Oct 8, 2026 · 49 min
Rising yields test a rally built on narrow leadership
The Rally and Rising Rate Risk 10/8/26
The episode examines whether higher borrowing costs and renewed AI-market doubts can expose weaknesses beneath strong headline equity performance.
- 1Rising Treasury yields threaten rate-sensitive sectors even as strong earnings support parts of the market.
- 2Narrow leadership, small-cap weakness, and stress in private credit complicate the case for staying fully invested.
- 3AI revenue concerns, energy demand, and company-specific stock ideas reveal a market searching for durable winners.
Don't miss
Michael Santoli and the panel confront whether weaker-than-expected OpenAI revenue could challenge the AI investment narrative and pressure its suppliers.
The brief
Scott Wapner and the panel weigh a record-setting rally against rising Treasury yields and hawkish Federal Reserve commentary, asking whether higher rates can derail equities despite strong earnings.
The market’s headline strength masks narrow leadership, widespread drawdowns, and pressure on small caps, while REITs hold up better than private credit and business development companies.
The discussion broadens to Microsoft’s evolving relationship with OpenAI, energy stocks, and the debate over whether AI-driven power demand is reshaping the sector.
Stock ideas range from Williams-Sonoma and Best Buy to Delta options activity, while speculation about a Starbucks–Chipotle combination raises questions about pairing two businesses with unresolved problems.
A late report that OpenAI’s annualized revenue trails prior expectations gives Michael Santoli and the panel a sharper test of whether AI can keep driving market leadership.
The episode closes with CNBC’s Financial Advisor 100, including Howland Capital’s people-first wealth model, before rapid-fire picks and the program disclaimer.
What was said on this episode
29 statements · 15 positive · 10 negative · 1 mixed · 3 neutral
Good earnings will not rescue the most interest-rate-sensitive sectors.
“I do not think good, quote unquote, good earnings reports are going to be enough to bail out the most interest rate heavy sectors in the market.”
Listen at 1:34
The S&P 500 could finish the year higher despite rate pressure.
“Doesn't mean we can't have a good finish to the year. Doesn't mean the S&P can't gallop higher. into December.”
Listen at 1:46
Five companies comprise approximately 28% of the S&P 500 index.
“there's five companies that are making up nearly 30%. I think it's about 28% of the index.”
Listen at 4:57
If prolonged rate hikes do not occur, current bond yields are attractive.
“if you don't think that's going to happen, yields are probably pretty attractive here.”
Listen at 8:59
Investors should select specific sub-industries rather than broad sectors.
“you have to be selective here.”
Listen at 9:35
Some real estate remains cheap despite rates being 100 basis points higher.
“a lot of it still looks pretty cheap, even in an interest rate environment that's 100 basis points higher than it is today.”
Listen at 10:38
Investors should consider rebalancing from stocks given five-percent two-year yields.
“We talked about two-year yields at 5%. You have a stock market that's been doing double-digit returns for four straight years. It's time.”
Listen at 14:13
Investors should buy Treasury bills and shorten bond duration.
“buy bills. Shorten your duration.”
Listen at 14:48
Investors may be able to lock in yields above five percent with no risk.
“you might have a moment in time where you can lock in five and change percent. Right. With no risk.”
Listen at 15:07
Russell 2000 companies are more likely to borrow at prevailing interest rates.
“the companies that make up the Russell 2000 have a higher propensity for having to borrow at prevailing rates.”
Listen at 15:46
Small- and mid-cap earnings are expected to be less attractive than large-cap earnings.
“we don't think that the earnings are going to be as attractive in that space as they are in the large cap space”
Listen at 17:13
Starbucks and Chipotle would each lose another 20% if they pursue a deal.
“I think both of these stocks will lose another 20 percent if they are seriously going to.”
Listen at 18:08
Starbucks and Chipotle face different operational challenges.
“I don't think this is a similar challenge.”
Listen at 19:17
Microsoft’s OpenAI renegotiation unlocked substantial value.
“I think that was the game changer that unlocked a lot of value”
Listen at 23:47
The economy and oil are the election’s two top issues.
“The two top issues in this election are absolutely the economy and oil being a big part of that.”
Listen at 25:31
When XLE is up double digits by October, it finishes higher eight of ten years.
“eight out of 10 years, this thing finishes the year even higher.”
Listen at 26:52
The energy-sector rally is likely to continue.
“I don't think this rally is done.”
Listen at 26:57
AI-assisted Williams-Sonoma shopping carts can produce orders nine times larger.
“the average shopping cart as a result of consumer use of AI. on the Williams-Cenoble website is leading in some cases to orders that are on average nine times higher than before.”
Listen at 32:34
Investors should stay long Williams-Sonoma above $250 on strong volume.
“If this thing can take out those old highs from earlier in the summer, get back above 250 on good volume, I think you want to stay long this trade.”
Listen at 33:41
Best Buy was bought below ten-times earnings with a dividend yield above five percent.
“When I bought it, it was trading at under 10 times earnings. It had over a 5% dividend yield.”
Listen at 34:22
Investors should select individual retailers carefully rather than buy the sector broadly.
“you need to really do your homework and choose the right ones.”
Listen at 35:32
Delta options trading showed a bearish bias ahead of earnings.
“the bias today is bearish.”
Listen at 36:05
Delta is the best airline.
“I think this is the best airline.”
Listen at 37:30
Delta has the highest ratings, best reviews, and strong on-time performance.
“they have the highest ratings, the best reviews, and they have a great on-time record.”
Listen at 37:38
Delta manages higher jet-fuel prices well because it owns a refinery component.
“they're very good at navigating these issues with the higher price of jet fuel because they've got the refinery component to the business.”
Listen at 37:50
JetBlue ended up strategically positioned between discount and premium airlines after the pandemic.
“the problem with JetBlue is like following the pandemic, they kind of ended up in no man's land.”
Listen at 38:11
Slowing OpenAI and Anthropic growth would undermine suppliers’ expected order books.
“if it stops to look exponential, then all the multiple years of orders from OpenAI and Anthropic that the rest of the food chain is calling their order book. You know, that's what you have to start to question”
Listen at 46:45
AI demand may be becoming more distributed across products rather than declining.
“It's just more distributed than it was when it was just Claude versus Chad GPT.”
Listen at 47:36
Netflix may be forming a double-bottom pattern.
“Maybe a double bottom.”
Listen at 47:58
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.