Sandy's Threefold Impact on the U.S. Economy

While there will be a number of individuals and families negatively affected by Hurricane Sandy over the next three days, the impact on the U.S. economy is already being felt, even before the most damaging part of the storm touches the eastern U.S. coastline.

Markets
First, the NYSE and Nasdaq are closed for at least Monday and Tuesday of this week. Not only does this put thousands of traders and brokers out of work for the two days, but it will cost an untold amount to the brokerage houses and banks in lost revenue. When traders and investors aren't buying and selling, transactions fees aren't being charged. The Website Trefis has E*TRADE (Nasdaq: ETFC  ) trading commissions representing more than 22% of the company's stock price. A few days of missed revenue is likely to hurt the little guys who rely on individual investors.

The markets typically have been closed unexpectedly only about once a decade. The last time it happened was Sept. 11-14, 2001, the days following the terrorist attacks in New York. And because of the unexpectedness of these events, we don't have any hard evidence that puts a dollar amount on the economic impact of the market closure. When the markets are closed on holidays, everyone is prepared for those changes, but with an unexpected closure, a number of events, business deals, commodity futures, and reports can be pushed back. All of which is likely to cost someone money.

Speaking of reports, a number of companies expected to announce earning early this week have already postponed and rescheduled their release dates. Some of the big names are Sirius XM Radio (Nasdaq: SIRI  ) , Pfizer (NYSE: PFE  ) , and Thomson Reuters (NYSE: TRI  ) . To find more companies that have postponed and new release dates, click here.

GDP
The biggest impact of Hurricane Sandy could be U.S. gross domestic product. With the 2% GDP growth reported last week, we may not see numbers as high in the fourth quarter. As of now, the storm is predicted to last in parts of western New York state and Pennsylvania till Thursday. But depending on how many days the storm keeps people out of work in major cities such as New York City, Baltimore, Washington, D.C., Sandy could have a meaningful impact on GDP. The U.S. government has shut down for at least one day, which means most of D.C. has also; New York is basically closed for business today, as is most of the Northeast. In all, the storm is expected to affect more than 60 million people.

One economist, however, says the storm won't have an effect on the health of the economy, as long as major infrastructure isn't damaged. I believe that to be true. This time next week, all will be normal again, but the economy will come to a temporary standstill in at least a few extremely important states this week, resulting in a lower GDP number for the fourth quarter.

Individual pops and drops
There are a number of industries that will be or have already been negatively affected by the storm. First of all, the airlines have already canceled more than 7,500 flights, ranging from regional jaunts from New York City to Washington, to trans-Atlantic flights from Philadelphia to Paris. American Airlines, United (NYSE: UAL  ) , Delta (NYSE: DAL  ) , ande nearly every other major airline will be affected by this storm.

The hotel industry will also probably see longer stays from some stranded travelers, but the overall picture looks weak. We've known for a number of days that this storm was coming; therefore, many big meetings were canceled or delayed in preparation. Not only will banquet revenue fall, but so will hotel stays in general, because of a lack of business travelers who can't get to their desired locations.

The big utility companies, such as Dominion Resources (NYSE: D  ) , are already feeling the storm's wrath. As of this afternoon, more than 10,000 customers are already out of power in Virginia and North Carolina. The company has moved workers from other states into areas that will be affected, which increases the company's costs. Furthermore, the Nuclear Regulatory Commission has also reported that all nuclear power plants in or near Sandy's path have been shut down. While I'm not an expert on nuclear power technology, I can't imagine that's a cheap thing to do. Not to mention, how much does it cost to make up the lost electricity capacity with no nuclear plants running?

Fellow Fool Dan Caplinger further discusses companies that will be negatively affected by the storm, such as Hartford Financial (NYSE: HIG  ) and Travelers Insurance (NYSE: TRV  ) . He also touches on a few companies that will feel a positive effect. Click here to read about those companies, or to keep reading about the storm's potential impact on your portfolio, click here.

Lastly, the storm has also affected the price of oil today. At $86 a barrel, oil is well off its highs and a good deal lower than that dreaded $100 mark. Most economists believe oil will rise back above $100, and if so, make sure your portfolio is ready with three stocks set to profit from high oil prices. Don't wait for the market to adjust -- click here today.

Matt Thalman and The Motley Fool have no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On October 30, 2012, at 4:14 PM, VolBeast56 wrote:

    Whatever large caps drop most, are the ones I'm buying heavy. "There's Blood in the water boys, let's go kill something,"

    Be safe out there for those in the Northeast.

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