Storm impacts insurers, energy stocks
NEW YORK — U.S. stocks finished little changed on Monday as investors focused on the effects of Tropical Storm Harvey. Insurance companies and oil drillers stumbled, while refineries rose along with gasoline prices.
With August coming to a close, Monday was one of the quietest days of the year on Wall Street. Biotech drug companies rose after hepatitis C and HIV drug maker Gilead Sciences agreed to buy cancer drug maker Kite Pharma for $11.9 billion. Travel booking website Expedia tumbled as investors expected the company’s CEO, Dara Khosrowshahi, to leave the company to become CEO of ride-sharing company Uber.
Lacking other major corporate or economic news, investors mostly focused on Harvey, which continues to hit parts of the Gulf Coast with historically heavy rains. Large parts of the energy and petrochemical industries are based there, and companies with a lot of stores in the area stand to lose business. While gasoline price spikes will be temporary, other effects of the storm will last for years.
“There will be ripple effects that everyone is going to feel,” said Jack Ablin, chief investment officer for BMO Capital Markets. He said that could include higher insurance premiums, as the storm is likely to cause tens of billions of dollars in flood damage. Ablin added that the storm might affect interest rates as well, as the Federal Reserve might hesitate to raise interest rates if they think the storm will slow the economy significantly.
The tropical storm, which made landfall Friday in Texas, is expected to continue for days, and the National Weather Service says some parts of Houston and its suburbs could get as much as 50 inches of rain. The weather shut down much of Texas’ oil and gas industry, and S&P Global analysts said about 2.2 million barrels per day of refining capacity was down or being shut down by Sunday.
Benchmark U.S. crude fell $1.30, or 2.7 percent, to $46.57 a barrel in New York.
Wholesale gasoline futures rose 5 cents, or 2.7 percent, to $1.71 a gallon, and refining companies climbed, as they stand to benefit from higher gas prices.
Insurance companies declined as investors worried that flooding from Harvey will lead to big losses.
Shoe retailer DSW lost $1.01, or 5 percent, to $19.04. Sporting goods company Finish Line declined 25 cents, or 2.3 percent, to $10.42 and Boot Barn retreated 24 cents, or 2.8 percent, to $8.33. Citi Investment Research analyst Kate McShane noted that all three companies have large numbers of stores in Texas. Some companies that may play a role in cleanup efforts after the storm traded higher. Those included environmental services company Clean Harbors, which rose $1.59, or 3.1 percent, to $52.98.