A potentially historic storm, an unexpected working relationship between President Donald Trump and the Democrats, and a profit warning from Walt Disney Co. (DIS) pulled markets in all directions on Thursday, Sept. 7.
The Dow Jones Industrial Average was down 0.10%, the S&P 500 declined 0.02%, and the Nasdaq added 0.07%.
Hurricane Irma, the latest weather risk, made landfall in the Caribbean earlier Wednesday and has the potential to reach Florida by the weekend. A state of emergency has been declared in Florida and Puerto Rico.
Miami is preparing for its largest evacuation in more than a decade Thursday as the U.S. National Hurricane Center warned that Hurricane Irma, potentially the most powerful storm to hit the American mainland since 1992, was maintaining its category 5 wind speed as it bears down on the south Florida coast.
Miami Mayor Carlos Gimenez issued a mandatory evacuation order for residents in some coastal areas of Dade County, the metropolitan area of Miami, to move inland and ordered local schools closed for the remainder of the week. The evacuation order, which will take effect at 7 a.m. ET on Thursday, is the first since Hurricane Wilma in 2005 and is expected to affect around 150,000 people.
Meanwhile, weekly jobless claims in the U.S. were the first data point to reflect the damage caused by Hurricane Harvey. Claims posted their largest increase in years as Harvey derailed thousands' ability to work. The number of new claims for unemployment benefits increased by 62,000 to 298,000 in the past week, the largest gain since Hurricane Sandy in November 2012 and the highest level since April 2015.
Harvey devastated the area surrounding Houston, the nation's fourth-largest city, with catastrophic, record-setting flooding in late August. The storm has taken the lives of 60 people in 11 counties, with roughly half of the fatalities in Houston's Harris County.
In terms of overall damage, Harvey could rank among the top costliest storms to hit the country. Superstorm Sandy in 2012 cost $73 billion in today's dollars, ranking second-most-costly behind Hurricane Katrina in 2005, which cost a massive $118 billion. Moody's said total losses from Hurricane Harvey will come in between $45 billion and $65 billion, with overall U.S. economic losses between $6 billion and $10 billion.
Harvey's flooding also disrupted operations at a number of refineries in the region. In the wake of the hurricane, at least 4.4 million barrels per day of refining capacity was offline. Texas accounts for roughly 30% of the U.S. refining capacity and Louisiana around 18%.
Refineries' limited ability to process crude oil caused U.S. stockpiles to balloon. Crude inventories in the week ended Sept. 1 rose by 4.6 million barrels, according to the Energy Information Administration. Analysts expected an increase of 4 million barrels after a drop of 5.4 million in the previous week. Gasoline and distillates stockpiles both decreased.
West Texas Intermediate crude was down 0.5% to $48.95 a barrel on Thursday morning.
Trump continued to surprise political pundits on Thursday, a day after unexpectedly agreeing with Democrats' deal to extend the debt ceiling through mid-December. On Thursday, Trump said there were "a lot of good reasons" to eliminate the ceiling limit altogether, a position championed by Senate Minority Leader Chuck Schumer.
Any plan to eliminate regular votes to raise the debt ceiling would still need to be passed by Congress. Republicans will likely oppose any legislation backing the removal of the ceiling after having used it as a bargaining chip in recent years.
The Senate approved legislation on Thursday afternoon that allocated disaster aid funds for Hurricane Harvey and raised the debt ceiling. The government has funding through Dec. 8.
Walt Disney contributed a large chunk of the Dow's losses after CEO Bob Iger warned of weaker profit this year. The world's largest entertainment company expects earnings per share "roughly in line" with fiscal 2016. Disney reported $5.72 a share in profit in 2016. Analysts had expected $5.89 a share this year.
Film franchises Star Wars and Marvel movies will be included on its planned streaming service, Iger said at an investor day on Thursday. In comments at the Bank of America Merrill Lynch conference, Iger said the service will also include four to five original films as well as the Disney studio library.
Disney shares were down 4%, while Netflix Inc. (NFLX) dropped less than 1%.
The European Central Bank said Thursday that it would leave interest rates unchanged and that it anticipates they will remain at the current level for an "extended period." The move was as economists expected. The bank's main refinancing operations rate held at 0% and the rate on deposits at minus 0.4%.
The central bank also said it would continue to repurchase assets through December and possibly beyond that date if needed. The bank currently repurchases 60 billion euros in bonds per month, though has left a possible increase to that amount open-ended should the economic outlook worsen.
"If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the programme in terms of size and/or duration," the ECB said in a statement.
Economists anticipate the program will begin winding down next year.
In a press conference Thursday, ECB President Mario Draghi said further monetary stimulus is needed to support inflation trends, though said the central bank had held early talks on how long to maintain its quantitative easing program. The ECB will further discuss easing plans at its October and December meetings.
U.S. productivity in the second quarter was revised to show 1.5% growth, up from 0.9%. Output was also increased to 4% growth from 3.4%. Unit labor costs were a third of previous estimates, coming in at 0.2% growth.
Activist investor Nelson Peltz late Wednesday released a 93-page white paper detailing his campaign for change at Procter & Gamble (PG) . Some of those ideas included plans to eliminate an "insular" culture, increase M&A activities and restructure the packaged goods company into three global business units. The activist investor, who owns about $3.5 billion in Procter & Gamble shares, says he wants to eliminate what he sees as a "suffocating bureaucracy." The plan comes as Peltz seeks one seat on the company's board.
In response, Procter & Gamble said Peltz had an "outdated and misinformed" view of the company's operations and that his paper held "nothing substantive." The company reiterated confidence in its current plan and board.
GoPro Inc. (GPRO) surged 12% after guiding for a surprise profit in its third quarter. Analysts had expected a net loss of 5 cents a share over the quarter. The action camera company also said it expects revenue at the "high end" of a previous range of $290 million to $310 million, surpassing consensus of $304 million. Chief operating officer CJ Prober said in a statement that "consumer demand for GoPro products is strong."
General Mills Inc. (GIS) moved slightly lower on Thursday after issuing guidance for its fiscal year ending May 2018. Adjusted earnings per share are targeted to rise 1% to 2% on a constant currency basis. Organic net sales are expected to dip 1% to 2% and total segment operating profit in constant currency to come in flat to 1% higher.
Barnes & Noble Inc. (BKS) slumped 9% after a disappointing first quarter. A net loss of 15 cents a share was 5 cents narrower than a year earlier, but wider than an anticipated loss of 12 cents. Sales declined 6.6% to $853.3 million, below estimates of $873 million. Same-store sales dropped 4.9%.
Eli Lilly & Co. (LLY) was 1% higher on reports it will cut 8% of its total workforce, roughly 3,500 positions. The drugmaker also plans to close a number of facilities, such as a research-and-development location in Bridgewater, N.J., and another in Shanghai. Eli Lilly anticipates a total charge of $1.2 billion.
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