Markets hesitate as Mideast caution grips investors

Dow was up 39, advancers over decliners 5-4 & NAZ gained 14.  The MLP index fell 2 to 285 & the REIT index slid 2+ to 433.  Junk bond funds drifted lower & Treasuries continued to see selling which brought higher yields.  Oil edged higher above 70 & gold retreated 15 to 2675 but still in record territory (more on both below).

Dow Jones Industrials 

Pres Biden & his administration are sticking to their position of not invoking the Taft-Hartley Act to force Intl Longshoremen's Association (ILA) dock workers back on the job at East & Gulf coast ports where a strike is hitting day 2 today, a political decision that reflects the power of unions 1 month out from an election but risks losing some progress on what is the #1 issue for many voters: the economy.  Rhetoric from Cabinet secretaries, including Transportation Secretary Pete Buttigieg & acting Labor Secretary Julie Su, has become sharper in recent days, pointing the finger at the ports ownership & ocean carriers.  But right now, there is no sign of any progress bringing the ILA & port owners back to the table for a new round of negotiations, according to sources.  And there remains a big risk on the other side of the political decision-making: wage increases that are a win for workers but ultimately ripple thru the economy in the form of higher prices, both domestically & around the world.  Much of the focus about the economic impact of the ports strike to date has been focused on the direct hit to the economy from the massive trade shutdown, & the ways in which supply chain congestion & delays can result in higher prices being passed along to consumers, which will become a bigger factor the longer a strike persists.  But maritime & business experts are also warning about the risk of persistent wage inflation making its way into supply chain prices that the Federal Reserve has recently been successful in taming.  “The wage increase would indeed be passed on and eventually be paid by the importers,” said Lars Jensen, CEO of Vespucci Maritime, a maritime shipping consultant.  “The inflationary impact would vary dramatically depending on the value of the goods inside the container,” he said, adding the influence would be an even bigger impact for agricultural exporters.

Biden said he won’t intervene in the port strike. That could backfire

Stellantis (STLA) US new vehicle sales continued a yearslong free fall during the 3rd qtr, despite CEO Carlos Tavares' attempts to correct what he has called “arrogant” mistakes.  The trans-Atlantic carmaker reported US sales of 305K from Jul thru Sep, a 19.8% decline from the 3rd qtr of 2023 & an 11.5% decrease from the prior & months of this year.  STLA was expected to be the worst sales performer of major automakers during the 3rd qtr.  Auto industry forecaster Cox Automotive had projected a sales decline of roughly 21% for the carmaker.  Cox & fellow forecaster Edmunds expect 3rd-qtr sales industrywide will be down roughly 2% compared with a year earlier.  Still, STLA said its initiatives to boost sales & correct past mistakes are starting to pay off.  The automaker cited a market share increase during the 3rd qtr from 7.2% to 8% as well as an 11.6% reduction in its US vehicle inventory.  “We continue to take the necessary actions to drive sales and prepare our dealer network and consumers for the arrival of 2025 models,” Matt Thompson, head of US retail sales said.  All of STLA' brands except for its niche Fiat unit experienced sales declines in the 3rd qtr, led by more than 40% reductions for Chrysler & Dodge.  Its Ram truck brand recorded a roughly 19% fall, while Jeep was off about 6% year over year.  The stock was off 7¢.

Stellantis U.S. auto sales extend free fall in third quarter

Eli Lilly (LLY) will spend $4.5B to build a center aimed at finding better ways to manufacture its medicines.  The facility, called the Lilly Medicine Foundry, will house development of new manufacturing methods with an eye toward efficiency.  It's a strategy that's already paying off with LLY's obesity & weight loss drugs Mounjaro & Zepbound, & LLY wants it to propel the rest of its pipeline.  The foundry serves a dual purpose: researching new manufacturing procedures, then putting them into practice with production of drugs for clinical trials.  The facility will be the first of its kind to combine research & production in a single location.  “The idea is to take molecules from a bench in a lab to scaled for medicines in a pharmacy, and this research and development site will do that work,” CEO David Ricks said.  The center, which is slated to open in late 2027, will be equipped to make small molecules, biologics & genetic medicines.  It will be near a $9B manufacturing complex LLY is building in Lebanon, Indiana, to produce pharmaceutical ingredients like tirzepatide, the active ingredient in Mounjaro & Zepbound.  The investments are part of its plan to build upon its success with Mounjaro and Zepbound, which are riding a wave of popularity in so-called GLP-1 drugs.  Mounjaro & Zepbound are expected to bring in $50B alone by 2028, almost twice the company's entire full-year revenue in 2022.  That gives LLY more freedom to invest, but it also puts pressure on the company to find & develop more new medicines to keep growing in the years to come.  LLY is already charting its future beyond tirzepatide.  The company also wants to develop more drugs for Alzheimer's disease & other neurodegenerative conditions like amyotrophic lateral sclerosis (ALS).  The stock rose 6.65.

Eli Lilly to build $4.5 billion research and manufacturing center

Gold inched lower, hitting a pause after rallying more than 1% in the previous session, as traders hunkered down for more US economic cues & developments on the Middle East conflict.  Spot gold was down 0.5% at $2649 per ounce.  Prices had jumped over 1% yesterday after Iran launched missile strikes on Israel.  US gold futures settled 0.8% lower at $2669.  Further limiting gold's run was strength in rival safe-haven $ which made greenback-priced bullion more expensive for other currency holders.  Gold is seeing a bit of a sell-off on a stronger $.  Gold has climbed over 28% so far this year & was still within sight of its record high of $2685 per ounce as fears of more escalation in the Middle East lingered, including retaliation by Israel.  Bullion is considered a safe investment during times of political uncertainty & thrives in a low interest rate environment.

Gold Rally Cools as Traders Eye Mideast Developments, US Data

Oil prices edged up on worries that the escalating conflict in the Middle East could threaten oil supplies from the world's top producing region, but a large build in US crude inventories limited gains.  Brent futures rose 34¢ (0.5%) to settle at $73.90 per barrel & US West Texas Intermediate crude climbed 27¢ (0.4%) to settle at $70.10 per barrel.  Yesterday, Iran fired more than 180 missiles at Israel, its biggest ever direct attack on the country.  Israel & the US vowed retribution for the attack, a sign that conflict in the region is intensifying.  Israel's retaliation could include targeting Iranian oil production facilities among other strategic sites.  Today, Iran said its missile attack on Israel was over, barring further provocation & added that any Israeli response to its attack would be met with widespread destruction.  In another escalation of the conflict, the Israeli military today sent regular infantry & armored units to join ground operations in southern Lebanon against Iran-backed Hezbollah.

Middle East Conflict Lifts Oil Prices Despite Large US Crude Build

Stocks have been under pressure his month as geopolitical concerns grip the market, dispelling the upbeat mood around hopes for US interest rate cuts.  At the same time, oil has extended a surge that saw prices spike over 5% yesterday, the most in almost a year.  In addition the strike by port workers could crimp the economy & there is a lot of damage to clean after Hurricane Helene.  All is in not well in the economy.