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S&P 500 closes at record high as Irma's blow is less than feared

CNBC logo CNBC 9/11/2017 Alexandra Gibbs and Fred Imbert


Stocks rose sharply Monday as the damage from Hurricane Irma appeared to be less than feared.

The Dow ended more than 259 points higher, with Apple and insurer Travelers contributing the most to the gains.

The S&P 500 advanced more than 1 percent to close at a record high, with information technology and financials leading. The Nasdaq added 1.13 percent as large-cap technology stocks rose.

The three indexes also turned positive for the month.

Hurricane Irma, once a Category 5 hurricane, hit the coast of Florida over the weekend. On early Monday, Irma continued to thrash the state, after slamming the Keys, Miami and other areas nearby in recent days.

The hurricane has gradually lost strength, however, and has been downgraded to Category 1 as it continues to move its way across land. Storm surges were also much smaller than the National Hurricane Center expected.

"We think Hurricane Irma could be a top 5 most costly hurricane in the U.S, although the losses could be in-line-to-lower than market expectations," Sarah DeWitt, an analyst at JPMorgan, said in a note Monday.

AIR Worldwide, a catastrophe modeling firm, said Monday it expects industry insured losses stemming from Hurricane Irma to range between $20 billion and $40 billion.

"Our sense is losses could be at the lower end of the range as the storm weakened faster than expected," DeWitt said.

Hurricanes have put markets on edge over recent weeks, as investors show signs of unease when it comes to assessing the impact of these natural disasters on certain markets, including insurance and airlines.

Shares of Travelers Cos., Progressive and American International Group rose 2.7 percent, 2.2 percent and 0.5 percent, respectively.

Shares of reinsurers, who could have been on the hook for extensive Florida damage because smaller insurers in the state are their customers, surged.

Everest Re Group and XL Group saw their shares soar 5.2 percent and 5 percent, respectively, and were the best performers in the S&P 500.

The SPDR S&P Insurance exchange-traded fund (KIE) rose 2 percent.

Meanwhile, Delta Air Lines' stock climbed 2.2 percent while American Airlines rose 2.9 percent. Carnival, a cruise line company, also saw its shares advance 2.8 percent.

"Hurricane Irma was tough, but it looks like it wasn't as bad as some expected," said Randy Frederick, vice president of trading and derivatives at Charles Schwab. "Towards the close on Friday, you saw a bit of a sell-off as ... people braced for the worst."

The anticipation of Irma making landfall in Florida initially raised concern over U.S. economic growth. In fact, economists at Goldman Sachs lowered their third-quarter GDP estimate to 2.0 percent from 2.8 percent on Saturday noting, "We find that major natural disasters are associated with a temporary slowdown in most major growth indicators."

Gold and U.S. Treasurys sold off Monday as investors lowered their exposure to traditional safe haven assets. The benchmark 10-year note yield rose to trade at 2.111 percent while gold futures for December delivery dropped 0.9 percent to $1,338.90 per ounce.

Geopolitical tensions are also set to be back on the menu Monday as the U.N. Security Council is expected to vote on a resolution regarding North Korea, according to Reuters.

Tensions between the Asian country and the West have escalated as of late, after North Korea failed to back down on its continuation of missile launches.

Investors were relieved, however, after North Korea's dictator, Kim Jong Un, chose to hold a party over the weekend, instead of opting for another missile launch. North Korea did say on Monday that the U.S. would pay a "due price" for spearheading a U.N. resolution against the country's recent nuclear test, according to Reuters.

Overseas, European stocks were in the black, while markets in Asia closed mostly higher.


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