Stock markets today: Stocks edge higher on Middle East caution, Tesla slips after deliveries fall

Dockworkers began strikes across the US East and Gulf Coast on Tuesday.

A walkout of about 45,000 workers “could boost economic growth and inflation” but only if the strike is prolonged, Morgan Stanley economist Diego Anzotegui wrote in a note to clients on Wednesday.

“Although the rails have already stopped service and shipping rates have been temporarily increased, we believe that transportation impacts should be reasonably limited unless there is a prolonged work stoppage,” Anzoatgui wrote.

He added that food and beverage prices will increase the most from the strike.

Additionally, the strike could affect economic data readings. Goldman Sachs' economics team estimated that the 10-day strike could hit gross domestic product by 0.2 percentage points in the fourth quarter. Meanwhile, workers on strike until October 12 are likely to take a hit in the October jobs report.

“If the strike lasts through the reference period, it will directly weigh on October wage growth by 45k, but the effect will subsequently be reversed by the end of the strike,” Goldman Sachs economists Elsie Peng and Jessica Rindel wrote in a note to clients Tuesday night.

Given the Federal Reserve's focus on a slowing labor market, economists are debating whether a weak October jobs report due to strikes will prompt the Fed to cut interest rates by 50 basis points.

Morgan Stanley's economics team argued that “the Fed looks at short-term fluctuations caused by strikes.” But Neil Dutta, chief economist at Renaissance Macro, argued that both the strike and the recent hurricane in the Southeast dealt a sharp blow to the October jobs report, due to other signs of a slowdown in the labor market.

“Yes, these problems may be temporary and will show up more in establishment surveys than households, but I don't think the Fed should ignore them because of the balance of risks,” Dutta wrote. “Why take chances with inflation solutions?”