The U.S. stock market's closure in the aftermath of the storm that slammed the East Coast didn't just affect the region's financial workers but brought financial decisions and information to a halt across the country.
The question now is whether the financial activity can spring back and the markets handle the pent-up resumption of economic and trading activity. Stock markets will reopen for trading today, following the two-day shutdown because of the storm, according to statements from the New York Stock Exchange and Nasdaq OMX.
Market observers anticipate a flood of trading as pent-up demand to trade stocks and make financial decisions is uncorked after the two-day closure. "It's critical to get started," says Edward Wedbush of Wedbush Securities in Los Angeles. "The market will be very active and could be volatile."
Financial accounts have been "stuck," says Andrew Ahrens, CEO of financial advisory firm Ahrens Investment Partners in Lafayette, La., a part of the nation more frequently hit by devastating storms than New York. "It's usually us that's closed and New York is open."
The financial freezing that market participants hope will thaw when trading reopens as expected includes:
Large financial decisions. Leaving cash parked in bank accounts has been unpopular since interest rates have been so low for so long, Ahrens says. That means investors have money tied up in exchange traded investments and mutual funds, which couldn't be liquidated while the markets were closed. That's put decisions on hold, Ahrens says. One client wanted to move quickly on a short sale on a home but couldn't sell securities to raise the money, he says.
In another example from California, Facebook employees were also directly affected. Monday was the day that a critical lockup was to be released on shares for the first time for many employees. Employees who may have wanted to sell their shares Monday to cash in after years of effort, and perhaps pay off loans or consider a large purchase, had to wait even longer. Furthermore, mutual funds and hedge funds must mark the values of the portfolios at the end of the month.
Earnings season. Companies are roughly halfway through the pivotal third-quarter earnings season, and several announcements have been postponed because of Sandy. These delays leave investors not only in a vacuum of information regarding trading activity and stock prices, but also up in the air on the health of the economy and corporate profits. Major companies that have postponed financial results include Automatic Data Processing, Avon Products, Cummins and Pfizer, says Sheraz Mian of Zacks Investment Research. "All of us are in the dark," he says.
Reaction to the storm. With markets closed, investors have been deprived of the assessment of the storm's financial damage. Investors will be keenly watching how the shares of the property and casualty insurers do when trading reopens Wednesday, says Robert Maltbie of Millennium Asset Management. "Investors want to know who is going to foot the bill," he says.
Investors hope that after the two-day standstill, the economy will resume where it left off without any lasting damage. Trading on futures earlier this week, though, indicated the market was under pressure due to the weak earnings reports already, Wedbush says. "I would not expect unsettling turmoil," Wedbush says. "But I'd expect high activity."
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