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Pre-Market Primer: Hurricane Sandy's Impact Could Be a Drag on US Economy

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There will be winners and losers after Hurricane Sandy, but mostly losers as employees are kept at home.

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MINYANVILLE ORIGINAL After the disastrous storm left the markets closed for two days -- the longest weather-related disruption since 1888 -- stock markets are set to return to operation.

The storm hit the Eastern seaboard, including the densely populated New York metropolitan area, a vast section of the country that accounts for a disproportionate share of the nation's economy. New York's subways are still not operational, and sections of Manhattan are still without power. Up and down the East Coast, employees are expected to be kept from work. According to economists surveyed by Bloomberg, the storm could subtract as much as 0.02 percentage points from the fourth quarter's GDP. In addition to the lost output, about $30 billion in damage -- not all insured -- will have to be repaired. This might lead to a bump in output later.

Stock are set to open higher this morning. Future contracts on the Dow (INDEXDJX:.DJI) rose 0.47% to 13,115.00. S&P 500 (INDEXSP:.INX) futures climbed 0.55% to 1,415.30, and Nasdaq (INDEXNASDAQ:.IXIC) futures gained 0.23% to 2,665.00. Today could see a lot of volume due to pent-up demand for trades. Many funds end their fiscal year in October, and today, they are likely to make a lot of last-minute changes to their positions.

The storm disrupted the releases of economic indicators. The conference board's consumer confidence survey for October, expected to show a rise to 74, from 70.3, was postponed until tomorrow. While trading was halted, a few indicators did come out. Personal income increased by 0.4% in September, in line with estimates. Consumer spending exceeded expectations with 0.8% monthly growth. The S&P Case-Shiller Home Price Index rose 0.5% in August, missing estimates of 0.7% growth. The Labor Department promises that it will have the monthly non-farm payroll and unemployment rate data ready for Friday morning.

Gasoline futures rose due to the possible effect that Hurricane Sandy could have on refinery output in places such as New Jersey. The supply disruption will be localized, and probably won't cause much of a change in the pump price of gasoline or crude oil prices.

Insurers might be punished in the markets. Last year, the much more subdued Hurricane Irene lead to losses at Chubb (NYSE:CB), Allstate (NYSE:ALL), and the Tower Group (NASDAQ:TWGP) in the fourth quarter of last year. Home improvement stores such as Home Depot (NYSE:HD) might get a bump as consumers repair and rebuild their damaged homes.

Over the weekend, the Greek government failed to reach an agreement with the troika on its 13.5 billion euro austerity package. One of the coalition parties refused new labor reforms and the European Central Bank, European Commission, and the International Monetary Fund are not budging on its demands. The snag? The Democratic Left party is refusing to abolish a 10% salary hike that Greek employees get when they marry. Yet again, Greece will have the deadlines for its reform plans kicked down the road to at least Nov. 5.

Unemployment in the eurozone hit a record high of 11.6% in September, up from 11.5% in August.

Twitter: @vincent_trivett
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
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