Today in the Market (10/23/2023)

Good Evening! On Monday, the stock was mixed as the benchmark 10-year Treasury yield briefly exceeded 5% before declining.

The S&P 500 and the Dow Jones finished the day in the red, declining 0.17% and 0.58%, respectively, while the Nasdaq Composite ended the day up by 0.27%.

NAME YOUR PRICE!

Chevron Corp. (CVX) announced its acquisition of Hess Corp. (HES), a smaller competitor, in a $53 billion transaction conducted entirely via company shares. This move intensifies Chevron’s competition with Exxon Mobil as it expands its operations in U.S. shale and the oil-rich region of Guyana.

The breakdown! The proposed transaction is an all-stock deal, where Chevron would exchange 1.025 of its own shares for each share of New York-based Hess. The transaction is anticipated to be finalized in the first half of 2024. On top of that, Chevron is acquiring a 30% ownership interest in Guyana’s Stabroek Block, which is known for housing the greatest crude oil find in the last ten years. By acquiring the block, the California oil giant is able to reduce the difference in size between itself and its bigger US competitor.

Name your price! Chevron’s readiness to offer a higher price for Hess, even after shares almost doubled in value last year, demonstrates that big oil companies in the US are prepared to use their financial strength to acquire oil resources for an extended period of time. Guyana’s appeal lies not only in the magnitude of its findings but also in its very low breakeven prices, which are among the most competitive for recent offshore projects worldwide.

HOW MUCH?!?

Did you know… According to the Treasury Department, the federal budget deficit for 2023 increased by 23% to $1.7 Trillion. This places the U.S. in its most significant annual financial shortfall (excluding the Covid period).

So what happened? Over 40% of the deficit was due to the decrease in tax receipts, while the government paid $659 Billion in interest payments, which is double the amount paid in the prior two years.

What does this mean going forward? The country’s deteriorating finances, coupled with a gridlocked House that is unable to advance legislation without a speaker, may intensify federal budget discussions, especially with a government shutdown on the horizon next month.

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