The stock market isn't the economy — but it's not nothing either

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1:26dot com. That's O-D-O-O dot com. We'll catch up with the week that was, of course. We'll talk stocks and retail and farming, too. From American Public Media, this is Marketplace.

1:51in los angeles i'm kyle risdahl it is friday today this one is the 12th of december good as always to have you along everybody we are at three and counting that is the number of federal open market committee meetings one jerome powell has left before he is done as chair and honestly he's going to have his hands full in the homestretch. Not only is the economy not cooperating with what Powell has said he wants to be a smooth transition, but his colleagues are kind of betwixt in between, too. So we, of course, are going to try to sort it all out right now. Sudeep Reddy's at MS Now. Kate Davidson's at Bloomberg.

2:26Hey, you two. Hey, Kai. Hey, Kai. Sudeep, we're going to start with you, and we'll go to the nuts and bolts of the meeting. The headlines already everybody hasn't seen. Anything that the chair said that was surprising to you in that meeting? Well, he was very clear that this is a difficult path they're on right now. There's lots of dissent, three dissents. That's a pretty big deal, most since 2019. And there's a reason there are all these dissents, because it's really hard to tell what's going to happen with inflation. It has been stubbornly high. That's been quite clear. It's in everybody's minds these days.

3:07And there's lots of concern that he was articulating about the job market. And you don't know whether that those numbers are going to be on a downward path, whether we're going to see the job market continue to deteriorate, which of course would solve the inflation problem, but in the worst way imaginable. And he's trying to navigate a committee that's scratching their heads over all of this stuff and figuring out where to go. So it's not a good place to be in the final months of your tenure. Kate, my note prompting me on the next question I wanted to ask you is, and this is a quote from my notes, dissent make me care.

3:46Much talk, of course, about how there were three dissents in this meeting, two that preferred not to cut at all, one that wanted to cut even more. Is this, and Powell talked about a little bit, he said we had a robust discussion and all of that jazz. But it seems to me this is what we ought to be bracing ourselves for because the economy can't make up its mind. The board now is more fractured and we ought to just get used to this. No. Yeah, I think there's some truth to that. And I think your point about should we care? It's a really great question. I mean, isn't dissent a sign of healthy debate?

4:20Is it a is it inherently problematic? I think that some people would certainly ask that. I think when it can become problematic for the Fed is they rely a lot on their ability to guide markets and to guide and signal things to the American public about where they're headed. And that just becomes really difficult when you're in a place where, you know, as Sudeep was explaining this, so many of them, they're uncertain about where the economy is headed. That's what's driving a lot of this. And so they have very divergent views. So it's not surprising that they would be split, but it just makes it harder for the Fed to send one sort of cohesive message about where they're headed.

4:59And so Jay Powell might think, you know, cutting right now is important. And they managed to signal that pretty clearly ahead of this meeting that they were going to cut again. But that just continues to get more difficult next year. Sadeep, let me ask you this, though. This is kind of a cynical question. You know, every time you talk to a Fed official, Powell or anybody else, about to whom they are trying to communicate, they always say we want the American people to understand what we do, which fine, sure. But honestly, they're really talking to the markets. And if I'm some guy in Otomo, Iowa, trying to make my mortgage and make my car repairs, the unified Fed message doesn't really matter all that much, right?

5:40It does not matter. But the people who are making decisions day to day are looking for some clarity about whether everything's going to be OK. And there is plenty of concern. Certainly you see it in survey data, concern about the economy. And there's plenty of concern about inflation. And when you look to the Fed, which obviously has the best available data and the best researchers and the best window into what's going on. And when they're shrugging and they're saying, well, I don't have a clue, what does that, where does that leave the rest of everybody else? And that is the concern here of how cloudy the picture is right now.

6:18It's very hard for everyone else to make decisions when you don't know, is inflation going to go up or is it going to come down? Is the job market going to stabilize and recover or is it going to fall apart? That's not a great environment to be in, whether you're a consumer or a business or anyone else in the economy. Kate, I'm going to get on the leading edge of what is going to be a whole swarm of coverage about Powell's legacy. He was asked about it at this meeting. He said, I just want the economy me to be in the best shape possible. You lead the Fed team at Bloomberg. You have, I'm sure, decades of wisdom behind you and you've got your own experiences.

6:50What is your take on Powell's legacy as we sort of enter the homestretch here for him? Yeah, I mean, important to note, right, that there's still about five months left and who knows what might happen early next year. But I think ultimately the simplest answer, I think, is Powell would be remembered for being the Fed chair who stood up to Donald Trump, right? I mean, there was a time where we maybe all thought, hey, he's the Fed chair that got the economy through the pandemic. And then it was, ooh, yikes, he's the Fed chair who has overseen the biggest burst in inflation in four decades. That was not great.

7:26He then was the Fed chair that managed to help bring inflation back down without triggering this deep recession. So there have clearly been ups and downs and I'm sure criticisms that if you were to examine closely his tenure that you could point to. But I think over time, looking back, I mean, this is really what has marked his eight years in the job is just all of the pressure that he got that was so unusual and so intense from Donald Trump. From the guy who appointed him, we do have to point out. Sadiq, I'm asking you this question in your capacity as the guy running things in Washington. Well, you get to decide who's running things, but for MSNOW.

8:09What are you worried about with this economy in the next six-ish months? And I want you to take the Congress of the United States into consideration as you answer this. The number one thing I'm looking at is what is the impact of immigration and tariffs? Tariffs being far higher than they once were, immigration being far lower, ultimately that will have a significant effect on the economy. And we have not been able to figure out exactly how significant, but those are the things that will define the overall trajectory in 2026. And when you figure those out, it will all make sense in retrospect.

8:51It does not make sense right now, which is part of the reason why things are so cloudy and why everyone's a little nervous about what's going to happen in the coming months. okay what are you worried about oh gosh um well i i think that um you know for most of most of the things that that's too deep laid out i mean there's always there's always the worry that you're totally missing something right um i think that we're constantly trying to figure out what is the piece that we're missing i mean we've been writing a lot about this idea of the k-shaped economy that some consumers are doing very well and they're holding things up.

9:29And there's this whole other group of people who are really struggling. And how sustainable is that? And is there something that could be lurking, some sort of event that tips things over where wealthier Americans aren't able to continue spending at the pace that they are? And consumer consumption is a huge driver of the economy. So you always have to be a little worried about about the unknown and what's lurking around the corner. Sudeep, I need to nail you down on this Congress in the United States thing, because I'm just thinking about the healthcare subsidies and all of that. And, and the idea that consumers now millions of them will have less money in their pockets.

10:05It has to be a challenge. It is a huge challenge. It is a challenge that's going to weigh on, uh, tens of millions of people and their economic wellbeing and their households. is going to weigh on how they spend money. It should be weighing on every lawmaker because of the number of people who are concerned about it, even beyond the folks who get subsidies. It is tied centrally to our politics. The health care questions, inflation, affordability is central to everything that any elected official is thinking about these days. So it is top of mind for everyone here. Sadiq Bredi at MSNOW in Washington and Kate Davidson and Bloomberg.

10:47Thanks, you two. I appreciate it. Thanks, Kai. Thanks, Kai. Wall Street on this Friday, not a winner. Marketplace's Mitchell Hartman is going to tell you why that matters in a minute. Here's a hint. Kate alluded to it. And then later, as always, we will have the details when we do the numbers.

11:35We'll get retail sales data for October next week. And again, this is an oldie but a goodie. Since spending by or on behalf of consumers drives 70 % of this economy, it is going to be good to finally know what's what. The caveat is that October doesn't quite get us to the all-important holiday shopping season. Data so far, this is from Adobe Analytics and the National Retail Federation, suggests that despite all the economic agita, the rate of consumer spending hasn't really declined. So while we wait for the government data, we're following some of our small business retail regulars through the holidays, and we've got some mid-season updates for you.

12:12First, Kalina Bruce at Noir Luxe Candle Bar in Seattle. People have been very intentional about spending and shopping with small businesses. And so we have felt that and it has been demonstrated in our numbers. We're definitely up from, you know, where we were this time last year. I would say sales are up about 15 percent from where we were this time last year. The biggest challenge by far has been the supply chain. We have just had so many just delays in receiving our shipments and it has caused, you know, tremendous backup for us when it comes to being able to produce for our clients. For instance, wax, our typical brand that we use is not available, so we'd have to explore other options.

13:09So that's what I'm doing today is driving around the city to figure out where I can get wax from so that we can keep our classes going, so we can get orders out, and just make sure that we are doing our due diligence with meeting timelines and meeting customer expectations.

13:28Colina Bruce driving around Seattle for Noir Luxe Candle Bar. Two more retail regulars coming up in a bit.

13:57We don't do straight-up stock market stories very often. First of all, because, say it with me now, the stock market is not the economy. But also, we don't usually do them, because as soon as we assign one in our morning meeting, the three major indices either spike or take a tumble. Today was a tumble day after the record highs yesterday. The thing the market can be useful for, though, is as a guide to what traders are anticipating, how they think the economy and those corporate earnings are going to do in the next six months or so. And when things do go up, that can juice economic growth, as Marketplace's Mitchell Hartman explains.

14:32Today wasn't so pretty compared to yesterday's hat trick of all-time highs. Today is more of a digestion day. Sam Stovall is chief investment strategist at CFRA Research. So far, only consumer staples and health care are in the green. You know the old saying that when the going gets tough, the tough go eating, smoking and drinking. And if they overdo it, they have to go to the doctor. Those are your traditional safe havens. The rally that led to yesterday's record highs, though, was much broader. Even as investors have pulled back a bit from high-flying AI-related stocks, they've plowed into others, says Gary Schlossberg at the Wells Fargo Investment Institute.

15:14We're starting to see a rotation into other sectors of the market. We're favorable on financials, industrials. Meanwhile, the AI boom is boosting companies involved in the AI build-out, says Jed Ellerbrook at Argent Capital Management. A lot of industrial companies and energy companies, second and third derivative beneficiaries of AI investment. Taken altogether, says Ellerbrook, we're seeing... This is a strong, balanced stock market rally. And maybe that's a little bit surprising given all the economic uncertainty, the policy uncertainty on tariffs and interest rates and all the rest this year.

15:52But remember, says Sam Stovall, The stock market anticipates the economy by about six or so months. Economic growth in 2026 will likely increase and that will filter down into retail sales, consumer confidence, etc. All the extra wealth from stock gains and tax refunds will juice the consumer economy, says John Lear at polling firm Morning Consult, though not for all consumers. Stock market growth has been a really strong driver of consumer sentiment for high-income consumers, and it's one of the reasons that we're experiencing this K-shaped economy right now, this divergence. The divergence between higher-income and lower-income consumers, who mostly don't own stocks and whose jobs and wages are increasingly at risk.

16:43Lear says stock gains make people who own stock feel richer and spend more. That's the so-called wealth effect. But there's a risk in this economic reliance on high-income earners. If the stock market tanks, they could stop spending. I'm Mitchell Hartman for Marketplace.

17:19Coming up. There's not like any particular category that seems to be going off the shelf. It's really just the things that are on sale. It's the thought that counts though, right? First, let's do the numbers. Dow Industrials dropped 245 points today, about a half of 1%, closed at 48 ,458. The Nasdaq leaked 398 points. That is 1.7%. Finished at 23 ,195, well off the lows, though. The S &P 500 down 73 points, 1.10%, 68.27. For the week, the Dow up 1%. The Nasdaq went the other way, down 1.6%. The S &P 500 dipped 6 tenths of 1%. Mitchell was talking about some of the market ties this week. One of the top performers, Carvana, the online used car company, has been rallying all week as it gets ready to join the S &P 500 on December 22nd.

18:13It is now worth more than GM and Ford. Go figure that one out. Carvana did pull back a bit today, though. Decelerated 3.6%. Lululemon performed well after a strong earnings call yesterday and an announcement that its CEO was stepping down in January. The athleisure company has been underperforming. Perhaps the era of leggings and yoga pants is coming to a close? Don't know. Ticker symbol L-U-L-U, stretched up 9 and 6 tenths percent. Today you're listening to Marketplace.

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20:40This is Marketplace. I'm Kai Rizdahl. Here's the thing about running a small business, any kind of business really, but retail in particular. You can advertise and market yourself and hustle all you can, but customers got to want to buy what you've got. Philip Rollins runs the comic and record store Offbeat in Jackson, Mississippi. Holiday business so far is okay. It's slower than normal, which I expected. We did some stuff to offset that, though. We participated in Record Store Day Black Friday. So we've been setting up at some markets to get more visibility, more promotion, and just, you know, meeting the people where they're at as well, too.

21:24So even though it's a small cost for some of these events, it's been worth it in the long run. We have plenty stock, so we're not really over. We're not trying to order a bunch of stuff. I'm hoping that people don't wait to the last minute to look for stuff. Because, I mean, stuff is running out. There's certain records that have not restocked. Hayley Williams is one of them. She had a new solo project. And she's very popular here being from Meridian, Mississippi. And when we did her listening event, we sold out of records. And people have been waiting on us to restock all of those since. And so it's kind of like playing a horrible waiting game right now.

22:14Phillip Rollins at Offbeat in downtown Jackson, Mississippi. One more Retail Regular coming up in a minute.

22:46Farming is notoriously an industry with thin margins. Farmers will tell you that themselves, that they are price takers, not price makers. So they're always looking for ways to cut costs, and technology is a critical tool. That's why in many parts of this country, drones are now doing the jobs of tractors and planters and planes. And as Jana Rose Schleiss reports from KBIA, the next frontier for sustainable farming could be the sky. For decades, an essential agriculture service was provided by crop dusters, small, low-flying aircrafts that applied pesticide or fungicide over fields. Actually, they don't dust, they spray.

23:27They also fertilize, plant seeds, even dry the crops for harvesting. But of course, this requires a pilot and a plane. And a few years ago, both of those started to become hard to come by, says Taylor Moreland in central Missouri. More and more farmers were demanding fungicide on corn than what pilots could apply. So Moreland started his own business, AgriSpray Drones. His company sells drones and trains farmers to use them to apply products, plant seeds, and check on crops, all with a remote control. It can be a lot easier than hiring a pilot in a crop duster. But Moreland says using drones does take practice.

24:10You have to learn a whole new concept because it's the first piece of ag equipment that flies, is battery-powered, and is autonomous. A group of students are learning how to fly ag drones on a Saturday morning at the fairgrounds in Montgomery City, Missouri. Instructor Caleb O 'Neill is leading a review after lunch. Anybody remember how to turn these things on, what the process is? Controller first. Controller first. As a field specialist for the University of Missouri Extension, O 'Neill travels the state demonstrating how to use two different types of agriculture drones. Who wants to fly this first?

24:47Small imaging drones can hover over fields and capture pictures and video. So if a field is too wet to get a tractor out, a farmer can still scout their crops.

25:01Larger drones can carry tanks to apply herbicide, pesticide, or fertilizer. And they're precise. They douse only the plants that need it. Unlike a crop duster's all-or-nothing approach. So let go. Yep. Left stick is your altitude. Rusty Lee is helping teach the class today. He's also a farmer who uses drones to precisely target chemical products on his fields of corn and soybeans. And that means using less chemicals overall. We've cut costs. We've reduced inputs. We've reduced environmental impact through using technology. So drones can be a tool to help farmers be more sustainable, both environmentally and economically.

25:46You don't last in the farming business without being able to evolve and incorporate and utilize new technology. And drones are just the latest new technology for an industry that's always changing. In Montgomery City, Missouri, I'm Jana Rose Schleiss for Marketplace.