U.S. equities and stock exchange traded funds slipped Monday as the energy sector weakened after the Gulf Coast energy hub was inundated by Tropical Storm Harvey.
The S&P 500 Index, along with related funds including the SPDR S&P 500 ETF (NYSEARCA: SPY), iShares Core S&P 500 ETF (NYSEARCA: IVV) and Vanguard 500 Index (NYSEARCA: VOO), were 0.1% lower Monday.
Dragging on the equities market, energy companies in the S&P 500 declined 0.8%.
Hurricane Harvey, the most powerful storm system to hit Texas in over half a century, caused flooding and paralyzed refined crude oil production. With the extensive damages putting a pause on normal refinery operations, the diminished demand from refiners has caused oil prices to fall – West Texas Intermediate crude oil was down 3.1% to $46.4 per barrel – and weighed on the broader energy sector.
“What it tells you is a slight risk-off trade. But nothing that is really shaking up the markets,” Matt Lloyd, chief investment strategist at Advisors Asset Management, told Reuters.
According to an insurance research group, the flood damage from Harvey could be equivalent to that from 2005’s Hurricane Katrina, which came with a $15 billion flood insurance bill.
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Observers, though, believe market activity could pick up ahead as a slew of reports come in, including the latest estimates for the second quarter gross domestic product, personal consumption expenditures and monthly jobs reports, the Wall Street Journal reports. Global data has also been relatively strong, supporting the outlook on corporate profits.
“It feels like we’re in a sweet spot for financial assets, where you have a synchronized global expansion while inflation remains low,” David Donabedian, chief investment officer at CIBC Atlantic Trust Private Wealth Management, told the WSJ. “There’s a lot of focus on Washington, but we shouldn’t forget that the strong economic backdrop is always the single most important backdrop for equity markets.”
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