Berkshire buys OxyChem, EV sales hit records, Amazon's grocery push and more in Morning Squawk

Berkshire Hathaway announced a $9.7 billion cash acquisition of Occidental Petroleum's OxyChem unit, its largest deal since 2022, deploying a portion of its record cash reserves. Concurrently, the U.S. government shutdown entered its second day, with Treasury Secretary Bessent warning of potential GDP impact and a data blackout that could influence Federal Reserve policy, though the S&P 500 reached a new high, indicating market composure. Separately, the Supreme Court ruled Fed Governor Lisa Cook will retain her voting position for upcoming rate-setting meetings, and Q3 U.S. electric vehicle sales hit a record, fueled by consumers leveraging expiring tax credits.

Analysis

The market is demonstrating a notable disconnect between mounting macroeconomic risks and investor sentiment. While the U.S. government shutdown is causing a data blackout on key metrics like jobless claims and prompting warnings of a GDP impact from Treasury Secretary Bessent, the S&P 500 has simultaneously closed at a record high above 6,700, reflecting expectations of a short-term resolution. On the corporate front, Berkshire Hathaway is executing a significant strategic move, deploying $9.7 billion in cash from its record $344 billion reserve to acquire Occidental Petroleum's OxyChem unit. This deal, Berkshire's largest since 2022, deepens its commitment to OXY, where it already holds a 28.2% stake, and triggered a 2% premarket gain in Occidental's shares. In the automotive sector, Ford, GM, and Hyundai reported record Q3 electric vehicle sales, contributing to an estimated 21% year-over-year rise in U.S. EV sales and a record 10% market share. However, this surge was explicitly linked to buyers rushing to utilize a $7,500 federal tax credit before its expiration, suggesting a significant pull-forward of demand that may not be sustainable.

Key Decisions for Investors

• View Berkshire Hathaway's $9.7 billion acquisition of OxyChem as strong validation of Occidental Petroleum's asset quality, warranting a potential re-evaluation of OXY's valuation and the broader petrochemical sector.
• Recognize that the record Q3 electric vehicle sales for Ford and GM were largely driven by an expiring tax credit, and it may be prudent to anticipate a potential demand slowdown in subsequent quarters.
• Remain cautious of the divergence between the S&P 500's record high and the risks of the government shutdown; an extension beyond the market's current 11-day expectation could introduce significant volatility.
• Monitor Federal Reserve commentary closely, as the shutdown-induced data blackout on key economic metrics could compel the central bank to adopt a more dovish policy stance at its upcoming meetings.