Storm hits wide swath of economy
Cyclone Sandy disrupted business activity nationwide as it forced a rare closure of the stock market and left corporate managers bracing for uncertain financial repercussions.
The maelstrom battering the Eastern Seaboard could dent the U.S. economy in the short term as businesses grapple with foregone sales that can’t be recouped. But it isn’t expected to inflict permanent damage and could provide a boost as companies and consumers rebuild.
“Economies come back pretty quickly afterward because a lot of money flows into the areas from insurance and the government,” said Ryan Sweet, a senior economist with Moody’s Analytics. “Any economic loss we incur this week, we’ll make up in subsequent weeks.”
The ferocious storm overshadowed encouraging economic news about the government reporting a better-than-expected 0.8% jump in consumer spending in September and a 0.4% rise in household income.
Still, Sandy is projected to register as one of the costliest storms in history.
Economic damages could reach as high as $20 billion, with insured losses of $5 billion to $10 billion, according to Eqecat Inc., which calculates estimates for insurers. The tally may run higher after factoring in the value of canceled flights, lost tax revenue, salaried employees who can’t work and lost sales at temporarily closed restaurant chains such as Applebee’s.
Separately, potential damage to residential property alone could amount to $88 billion, with 284,000 homes at risk, according to one estimate.
Post-storm rebuilding efforts could help boost the weak construction sector and funnel investment into stricken areas, said Peter Morici, a professor at the Smith School of Business at the University of Maryland.
The effect on individual industries and companies won’t be known for several weeks. One big question mark is whether consumers will curtail or adjust their holiday shopping if forced to make pricey repairs to storm-ravaged homes or cars.
“If I’m spending more on batteries and flashlights, probably at a higher price because they’re in demand, that’s less money I’ll have for a new shirt or a toy to put away for the Christmas season,” said Brian Sozzi, chief equities analyst at NBG Productions.
Sandy walloped businesses from New York to Virginia.
Scores of companies closed Monday and are likely to remain shut at least through Tuesday. Airlines canceled thousands of flights, inconveniencing vacationers and forcing stranded business travelers to scramble to find lodging in suddenly packed hotels.
Employees of larger companies who were able to telecommute from home did so. Mom-and-pop retailers and restaurants, many of which subsist on razor-thin margins, simply wrote off the day, hoping to recapture a fraction of lost sales later in the week.
The virtual closing of East Coast commercial centers threw off business rhythms nationwide, with the absence of employees in New York and Boston hampering those elsewhere.
Several companies delayed the release of third-quarter earnings reports. They included drug giant Pfizer Inc., financial data provider Thomson Reuters Corp. and NRG Energy Inc. MPG Office Trust, a Los Angeles real estate investment trust, put off its profit report until Nov. 5.
New Jersey casinos, which are typically oblivious to the outside world, were evacuated. Social media sites such as Twitter and Facebook were swarmed with photos of barren shelves at retail stores.
Several stores, such as a Whole Foods in Cambridge, Mass., featured “Frankenstorm Essentials” displays near stacks of cheese and other snacks. Grocery store chain A&P; posted an alert on its website urging customers to shop while they still could.
The most visible effect was to the U.S. stock market, which experienced its first unscheduled closure since the 2001 terrorist attacks.
After initially pledging to remain open, the New York Stock Exchange and other financial markets said they would close Monday and Tuesday. The Big Board plans to reopen Wednesday, although that could depend on the condition of the exchange’s electrical and computer grid, which is vulnerable to water damage given its Lower Manhattan location.
One positive is that hurricanes historically haven’t ravaged the stock market.
The median value of Standard & Poor’s 500 index has been higher one month after hurricanes, according to S&P; Capital IQ. That’s also true after three months and six months.
Share prices even have risen after the most brutal storms, including Hurricane Katrina in 2005, according to the research firm. The S&P; 500 was up 6% six months after that storm lashed the Gulf Coast.
Some companies may have taken advantage of the gale to release bad news at a moment when investors’ attention was elsewhere.
Companies filed 267 formal notices Monday disclosing significant corporate news, according to Michelle Leder, editor of Footnoted.com.
That compared to 247 a week earlier and raises eyebrows, she said, because “you have to keep in mind that pretty much all of New York is shut down” Monday.
Times staff writer Alejandro Lazo contributed to this report