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Published On: Sun, Nov 4th, 2012

Dow Jones Drops by 139 Points on Back of Superstorm Sandy

As the aftermath of Superstorm Sandy plays out, stock markets in the United States gradually return to normal. Despite the release of strong job numbers this week, the Dow Jones Industrial average still dropped 139 points. News of a recovering economy has been overwhelming drowned out by businesses complaints about gas shortages and downed electrical lines in the area hit worst by the hurricane.

Verizon Communications stated this week that the hurricane would significantly impact their fourth quarter earnings. Verizon is based out of downtown Manhattan and is one of the many companies that do not have power. Although the true cost of the storm is not yet known, Verizon will have to invest significant amounts of money on repairing downed or broken cell towers on the East coast. On Friday, stock in Verizon Communications dropped $0.62 to reach $44.52.

For the day, the Standard & Poor’s 500 index fell 13.39 points, or 0.9 percent, to reach 1,414.20 by closing. The Dow Jones industrial average was 1.1 percent lower at 13,093.16. The Nasdaq composite index was also impacted by the negative sentiment and ended the day 1.3 percent lower or 37.93 points. By the end of Friday, the Nasdaq sat at 2,982.13.

The Labor Department in the United States released their jobs data for the month of Friday. In the month of October, the world’s largest economy added 171,000 jobs. At the same time, the unemployment rate grew to 7.9 percent as new job seekers flooded the market. The United States government also stated that there were more jobs created in the preceding two months than had originally been thought. After the news was released, stocks in the United States and Europe rose. The Dow Jones industrial average gained by 57 points in the first 30 minutes of trading. After this initial rise, US stocks began their gradual decline for the remainder of the day. Ten out of ten categories on the Standard & Poor’s 500 index ended the day lower.

Two of the best performing companies on the Standard & Poor’s 500 index were priceline.com and TripAdvisor Incorporated. Both companies posted higher-than-expected earnings for the third quarter. Priceline rose 8 percent, or $48.64, to reach $634.74. TripAdvisor gained an astounding 19 percent, or $5.71, to end the day at $35.12. A surprising third-gainer on the S&P, Starbucks, posted an increase of 9 percent. It rose by $4.22 during the day to end the session at $50.84. According to Starbucks, global revenue rose by 6 percent from the months of July to September. This gain was only tracked for cafes open for longer than a year.

Insurers Take a Hit

With massive damage spanning the east coast of the United States, insurers are bound to take a financial hit in the coming months. Analysts at Raymond James and Barclays cut their revenue forecasts for Hartford Financial Services Group Incorporated and Allstate. They warned the two companies that the storm would take away much of their income.

Allstate stock dropped 49 cents to reach $38.56. Hartford plunged 3 percent, or $0.66, to end at $21.26. Other insures also saw a fall in their share prices on Friday. Genworth Financial Incorporated fell 16 cents, or 3 percent, to reach $6.06. American International Group Incorporated saw its share prices retreat by 7 percent, or $2.52, to end the day at $21.26.

On a positive note, Restoration Hardware Holdings Incorporated saw its shares rise by 30 percent, or $7.10, to $31.10. Friday marked the first day for the home décor retailer to trade on the New York Stock Exchange.

Canadian Stocks Drop

After seven sessions of gains, Canadian stocks fell for the first time in Friday. This drop was led by a two percent decrease in crude oil prices and gold bullion. The retreat continued with mining and energy stocks. Apot gold fell to a two-month low of $1,690 which marks its fourth week in a row of declines. The strengthening United States dollar played a role in the weakening gold and commodity prices. Generally, a stronger greenback will make commodities more costly for investors who use other currencies. Out of the six biggest drags on Canada’s TSK, five of them were caused by fold miners. Overall, the index materials group spans about 20 percent of the TSX index’s weight.

By the end of the day, Yamana Gold Incorporated retreated 5.09 percent to C$19.00 while Goldcorp fell 5.02 percent to reach C$42.91. Agnico Eagle Mines Limited also retreated 6.3 percent to finish out the day at C$52.65. After dropping 9.48 percent on Thursday, Barrick Gold Corporation lost another 3.64 percent on Friday to end at C$35.23. These losses are partially attributed to lower profits in the third quarter.

About 25 percent of the index is made up of energy stocks. Some of the losses made on Friday were from this sector which posted an overall decline of 1.47 percent. Crescent Point Energy was down 3.79 percent to C$39.86 while Cenovus Energy dropped 3.18 percent to C$34.45.

The financial sector showed some gains for the day as Toronto-Dominion Bank grew by 0.69 percent to C$82.25. Manulife Financial Corporation also increased 1.62 percent to reach C$12.56. The financial sector rose on average by 0.23 percent for the day.

Specific gainers for the day include the SNC Lavalin Group Incorporated. This group saw share prices rise by 4.79 percent after losses for the quarter were less than previously expected. SNC Lavalin Group ended the day at C$42.17. Inmet Mining Corporation boasted of a 19 percent rise in third-quarter profits due to copper sales at the Las Cruces mine. Shares prices in Inmet Mining Corporation rose by 6.77 percent to end at C$56.17.

Thomson Reuters Corporation saw its shares fall by 1.30 percent on Friday due to a 15 percent decrease in the company’s operating profit. Part of the decrease in profit was attributed to lower revenues and the higher costs. Shares of Thomson Reuters Corporation ended the day at C$28.06. Bombardier Incorporated also saw a 2.13 percent decrease in share prices and the stock ended the day at C$3.68. The rail-car maker is currently managing a strike at its factory caused by outsourced jobs and pension disputes.

TransGlobe Energy Corporation watched stock prices rise by 10.14 percent to C$12.06. Out of 15 blocks on offer in Egypt, TransGlobe Energy Corporation managed to with four of its bids.

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About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.

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