Hurricane Irene may have had a deleterious effect on most of New York, but Wall Street was the exception. Financial stocks did especially well for the day, led by insurance companies that were directly and positively impacted by the minimal hurricane related damage.
Evacuations and excessive media coverage of hurricane Irene was damaging to insurers. Many investors anticipated massive payouts ahead alongside the recent string of natural disasters. Researcher Kinetic Analysis says Irene will cost insurers an estimated $2.6 billion, down from $14 billion before the storm hit when meteorologists were predicting Irene to strike New York as a Category 2 storm. The surprisingly nominal damage led insurers to become one of the strongest subsectors on the S&P 500 today, with half of insurers adding more than 5 percent.
Among insurers Hartford Financial Services Group Inc. (HIG) led the gains. Shares of Lincoln National Corp (LNC), which underwent a downgrade last week and hit 52-week lows also bounced back during Monday trading. The Allstate Corp. (ALL) also traded higher on the news. The ailing American International Group Inc. (AIG) was also positively impacted by the lack of damage.
Elsewhere in the sector, shares of Bank of America (BAC) had investors scooping up shares for a reason that didn’t include a Warren Buffett investment or a super bargain bin prices. The announcement that the bank will raise billions in cash from the sale of Chinese bank, CCB (CICHY), helped prop up shares from recent lows. Following the sell-off BAC will continue to hold a 5 percent stake in the company, half of its current level.
The bank’s balance sheet has been among the primary reasons investors have been selling shares. The sale is expected to garner $3.5 billion in additional Tier 1 common capital and reduce r risk-weighted assets by $7.3 billion according to Bank of America’s Chief Financial Officer. Slated to close in the third quarter, the CCB sell off is anticipated to generate $8.3 billion in cash.
The rise of Bank of America led the remainder of the major banks higher with shares of Citigroup (C), Goldman Sachs (GS) and JP Morgan (JPM) all ending the day with gains around 4 percent.