Los Angeles wildfires send Travelers stock lower as Dow Jones reels from hot labor market

• AccuWeather estimates that damage from LA wildfires could reach $150 billion.
• JPMorgan estimates $20 billion worth of insured damage.
• Chubb, Travelers and Allstate are most affected by fires.
• US December NFP showed Unemployment Rate falling, making Fed likely to hold.

 

The news continues to be bad at the start of 2025 for US equity investors. What first appeared to be a somewhat confined wildfire in the upscale Pacific Palisades neighborhood north of Los Angeles on Tuesday has spiraled into at least five separate fires that are devastating the city. Estimates have risen above $100 billion worth of total economic losses, and a good chunk of that liability will surely fall on The Travelers Companies (TRV).

TRV stock sank 4.5% on Friday as the fires moved into their fourth day and California officials are now estimating that as many as 10,000 structures have been damaged. On Wednesday, that figure had been just 1,000. 

Travelers’ main index, the Dow Jones Industrial Average (DJIA), collapsed to new range lows not seen since November 5, 2024. The DJIA plunged 1.5%, slightly outperforming the 1.6% sell-off from the NASDAQ. December’s US Nonfarm Payrolls (NFP) report was released in the morning session, showing heavy hiring activity, and the Unemployment Rate dropping to 4.1%. 

While this NFP may be a good sign for workers, the market is disgruntled since a tight labor market gives the Federal Reserve (Fed) less impetus to cut interest rates. Wall Street currently doesn’t expect any further rate cuts until June at the earliest.

Travelers stock news

AccuWeather, a weather forecaster, dramatically raised its estimates of economic losses for the LA fires from a range near $55 billion on Wednesday to a range between $135 billion and $150 billion by Friday. At least five people have been killed so far, but this number might rise with the fires still yet to be under control.

This is, however, not the same as insured losses, which JPMorgan estimates are near $20 billion. Three insurance companies — Chubb Limited (CB), Allstate (ALL) and Travelers — are thought to be the most-affected by the destruction. That estimate is being updated, however, as the facts change. On Wednesday, the figure was put at $10 billion.

Neighborhoods near the simultaneous blazes quickly ran out of water to fight the fires and could not be replenished in some cases due to low water pressure. City officials said that the water tanks supplied enough water to fight several single-structure fires at once, but not enough to fight fires engulphing entire neighborhoods.

Nearly 200,000 Angelenos have been asked to evacuate, and experts are calling it the most expensive wildfire in the nation’s history, although far fewer people have died compared to many other fires that affected more rural environs. 

Jimmy Bhullar, a JPMorgan analyst, said he expects the vast majority of insurance losses to be tied to homeowners’ insurance rather than commercial policies.

"To the extent that primary insurers are affected, reinsurers would be affected as well," Bhullar said in a client note. "However, relative to previous fires-related losses, we expect primary insurers to incur more of the losses and reinsurers less, mostly due to the increase in reinsurance attachment points since 2023."

Travelers stock news

Travelers stock was already in a downtrend since registering the secon leg of a double-top pattern on November 29. TRV shares momentarily fell below the $232 support level from October 2024 during Friday's session, which means that traders should expect the downturn to continue.

With the 100-day Simple Moving Average (SMA) showing itself as resistance of late, the 200-day measure near $229 looks probable. Below there, TRV could drop the whold way to the $200 to $208 demand zone from last July. Hence, it is paramount that TRV holds onto that 200-day average.

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