Certain Stocks Jumped Post-Katrina, Influenced by Economic Factors
Hurricane Katrina decimated New Orleans in 2005. What stocks soared following the natural disaster? How did certain economic factors impact the stocks?
Aug. 30 2021, Published 12:17 p.m. ET
In 2005, the stock market wasn't on the minds of Louisiana residents. It was the estimated 1,833 fatalities that occurred following category 3 Hurricane Katrina. They were thinking about hundreds of billions of dollars in property damage that left many families and business owners with nothing.
Still, the stock market kept moving—as it almost always does, disaster or not. Some stocks surged following the national disaster, marking a post-Katrina event. Investors profited, although what they did with those capital gains may or may not have been altruistic.
Broad stock indicators moved higher immediately following Hurricane Katrina
According to an Associated Press report published on August 30, 2005—one day after Hurricane Katrina hit New Orleans, "The Standard & Poor’s 500 index gained 7.18, or 0.6 percent, to 1,212.28, and the Nasdaq composite index rose 16.88, or 0.80 percent, to 2,137.65."
Also, the Dow Jones industrial average climbed 0.63 percent. Crude oil futures gained some momentum after then-President George Bush had discussions about whether to offset the Gulf Coast region's supply disruption from the national petroleum reserve.
By the end of the day, energy prices spiked and stocks followed suit. Companies like ExxonMobil Corp. (NYSE:XOM) and Chevron Corp. (NYSE:CVX) gained some steam.
Swing-term stock results post-Katrina
In the early half of September 2005, stocks like medicine company Nektar Therapeutics (NASDAQ:NKTR), then-publicly traded palm operating system Palmsource (now owned by Tokyo-traded Access Co.), and McDonald's Corp. (NYSE:MCD) rose.
The Dow Jones Home Construction index rose by 2.8 percent during that period, while the Amex Oil index gained 2.6 percent.
What stocks swelled in the long term after Katrina?
After the dust settled and recovery efforts started, certain stocks saw marked growth in the post-Katrina world.
Shortly after the storm, home improvement stocks found themselves in a bull run of their own. Home Depot (NYSE:HD) and Lowe's (NYSE:LOW) both saw immediate growth and rose 2 percent on demand. However, that ultimately waned out with an identical 17 percent loss in the year ending August 25, 2006. A lot of this had to do with larger economic factors outside of the hurricane.
Insurance companies like Montpelier Re (now owned by Endurance Specialty) and United Fire and Casualty (NASDAQ:UFCS) increased due to their relevance to the major natural disaster. UFCS in particular rose nearly 16 percent in the three months following Hurricane Katrina.
As for crude oil, Hurricane Katrina led to eight major refineries being shut down for good. Big companies like Valero (NYSE:VLO) and Marathon Oil (NYSE:MRO) suffered losses. Valero stock was able to gain 36 percent of value in the upcoming year, while Marathon gained 56 percent. The demand outweighed the burden.
Ultimately, the results of the stock market following the disastrous Hurricane Katrina were impacted not only by the storm, but by various other economic factors unique to the time. Currently, category 4 Hurricane Ida has left all of New Orleans without power 16 years to the day after Hurricane Katrina. The stock market prepares for what's next while carrying COVID-19 pandemic matters in tow.