The path of Hurricane Florence’s potential destruction runs right through markets from stocks to mortgage-backed securities.
The Category 4 storm -- which is forcing more than 1 million people to flee to safety and could wreak as much as $27 billion in damages in the states of North Carolina and South Carolina -- has already struck insurance stocks and funds holding catastrophe bonds as investors try to front run the possible disaster.
“The bottom line: it seems to be pretty serious,” Sid Ghosh, a senior analyst with Moody’s Investors Service, said of the storm. “Everybody is watching it, and so are we.”
Here are some of the markets that are most vulnerable to the impending storm:
Stocks
Should Hurricane Florence make landfall between South Carolina and Virginia, insurance companies could be on the hook as the storm could cause $15 billion to $20 billion in covered losses from wind and coastal storm surge. Insurance companies in the S&P 500 Index have underperformed the benchmark since Thursday.
Two insurance companies have a lot of business in Florence’s path: Allstate Corp. and Travelers Companies Inc., which are both down by more than 2 percent since the storm increased in intensity and focused on the Carolinas.
The $66 million Invesco KBW Property & Casualty Insurance ETF, ticker KBWP, has the most exposure to the insurers, with Allstate the second-largest holding and Travelers the fifth, making up a combined 15 percent of the fund. KBWP fell as much as 0.7 percent Tuesday after dropping 2 percent over the previous two sessions. The iShares U.S. Insurance ETF, ticker IAK, also has elevated exposure to the two insurers with both ranking in the top 10 holdings.
Another sector that could take a beating are utilities that serve the two states. Duke Energy Corp. and SCANA Corp. fell more than 2 percent over the last three days.
On the flip side, home-improvement retailers are seeing a storm-related boost. Home Depot Inc. and Lowe’s Cos. both rose Tuesday, extending gains for the fourth straight day. Generac Holdings Inc., which makes generators, gained more than 7 percent over the past two days, pushing the stock to the highest since 2014.