Tuesday, October 1, 2024

Markets pull back while oil spikes on rising Middle East tensions

Dow went down 295, decliners over advancers 2-1 & NAZ declined 392.  The MLP index was up about 1 to the 286s & the REIT index fell 3 to the 435s.  Junk bond funds inched higher & Treasuries had heavy buying which reduced yields sharply.  Oil jumped 2+ to about 71 on war fears in the Mideast (more below) & gold shot up 22 to 2681.

Dow Jones Industrials

Israel has launched a ground incursion into Lebanese territory, with markets on edge over the possibility of a serious escalation in the conflict between the Jewish state, the Hezbollah militant group & Iran itself.  In a statement today, Israel's Defense Forces said they had begun “limited, localized and targeted ground raised” against targets in southern Lebanon that they say pose an “immediate threat to Israeli communities in northern Israel.”  The Israeli air & artillery forces are supporting the offensive, the IDF added.  A senior White House official, meanwhile, said that the US has seen indications Iran is preparing to “imminently” launch a ballistic missile attack on Israel.  Any direct attack on Israel by Iran “will carry severe consequences for Iran,” the official noted.  Oil prices moved sharply higher today, with Brent crude futures with Dec expiry trading at $73.83 per barrel, up 3% on the previous settlement, & the front-month Nov WTI contract was 3.3% higher at $70.34 per barrel.  Isreal's ground incursion into Lebanon marks a shift in its military attention away from the Gaza Strip, where it has been carrying out a retaliatory campaign in response to Oct 7 terror attack carried out by Palestinian militant group Hamas.  Iran-backed Hezbollah & Israel, meanwhile, have been trading cross-border fire since last year, when the Lebanese group declared solidarity with the Palestinian cause.  The Israeli offensive in Lebanon comes after the IDF assassinated Hezbollah chief Hassan Nasrallah on Sep 27, rattling the group's command structure & follows a devastating bombing campaign that has killed more than 1000 people in Lebanon & displaced 1M people to date.

Israeli forces launch ground offensive in Lebanon as markets fear escalation

US port workers are starting to speak out on the picket line, providing a better understanding of the top issues union members are advocating for.  "I started 27 years ago and my wages increased only $25 over the 27 years," Joe Mosquera said.  "So to me, I believe that we've taken less than we've deserved in the past. So now it's time," he added.  The Intl Longshoremen's Association (ILA), which represents 45K dockworkers, began its first strike since 1977 after its 6-year contract with the US Maritime Alliance (USMX), which represents port employers, expired yesterday.  Negotiations between the ILA & USMX have been deadlocked thus far over the union's demands related to wage hikes & compensation, as well as protection from automation at ports.  "We are just looking to be paid fairly and for the goods we take care of every day. And we did not stop during COVID, and we don't want to stop right now," Mosquera explained.  "We are willing to go back as soon as they decide that they'll give us a fair contract."  USMX reportedly made a new offer to the ILA yesterday that would've raised wages by nearly 50% over the new contract as well as tripling employer contributions to retirement plans, better health care & kept language about automation in the deal.  Sources said that the ILA rejected the offer & didn't make a counter.  "What's fair is whatever my union president is willing to negotiate to. But to be low-balled, he's not going to agree to that," Mosquera said.  ILA Pres Harold Daggett claimed the initial negotiation offers "didn’t work out," but the group is "always willing to sit down when the right number is hit."

Port workers speak out on picket line: We’ll be here ‘as long as it takes’

PepsiCo (PEP) is buying Mexican-American food company Siete Foods for $1.2B, marking the company's first food acquisition in 5 years.  Like many food companies, PEP has been trying to shift its portfolio to include healthier options in recent years, usually through acquisitions.  Recent additions include Bare Snacks, Health Warrior & PopCorners.  Soon that will also include Siete.  Founder Veronica Garza started the company in 2014, when she began selling grain-free tortillas.  Since then, its portfolio has grown to include tortilla chips, taco shells, salsas &seasonings, often designed to accommodate different dietary restrictions.  “We look forward to expanding our multicultural portfolio with these incredible products and even more consumers discovering and enjoying Siete,” PEP CEO Ramon Laguarta said.  The deal is expected to close in the first ½ of 2025, assuming it receives regulatory approval.  Deal-making has picked up this year for packaged food companies, who are turning to acquisitions to drive sales growth as shoppers buy less of their products.  PEP stock went up 57¢.

PepsiCo to buy tortilla chip maker Siete Foods for $1.2 billion

Stocks were sold on reports that Iran is preparing a potential missile strike against Israel.  The major strike at east coast ports that could cost GDP $5B daily did not help matters.  Also early monthly economic data for Sep was inconclusive.  There are plenty of problems for investors to deal with.

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