U.S. stocks endured a tough day on Friday, as a combination of devastating California wildfires, soaring oil prices, mixed corporate earnings, and sector-specific losses weighed heavily on investor sentiment. The Dow Jones Industrial Average fell 550 points, or 1.3%, while the S&P 500 dropped 1.5%, and the Nasdaq Composite fell 2%. Despite a broad sell-off, energy stocks saw a rally due to rising oil prices, while insurance stocks suffered significant losses, and Walgreens, Delta, and tech stocks contributed to the volatility.
Insurance Stocks Slide as Wildfire Losses Escalate
The ongoing wildfires in California prompted concerns over massive insurance losses, leading to steep declines in the shares of major insurance companies. Allstate and Chubb each dropped 4%, while AIG and Travelers lost around 2%. Analysts at JPMorgan projected that insured losses could exceed $20 billion, far surpassing the $12.5 billion losses from the 2018 Camp Fire. With over 1,000 homes destroyed in high-value regions like Pacific Palisades, the risk of significant claims continues to put pressure on the insurance sector. Reinsurers such as Arch Capital Group and RenaissanceRe Holdings also experienced declines, shedding 2% and 1.5%, respectively.
Energy Stocks Rally as Oil Prices Surge
While most sectors struggled, energy stocks were a bright spot as oil prices soared. Brent crude surged past $80 per barrel due to U.S. sanctions on Russia’s oil sector, which are expected to disrupt global supply chains. Devon Energy and EOG Resources rose by 2% and 2.5%, respectively, helping the energy sector post a 1% gain. The increase in oil prices helped offset broader losses across the S&P 500, offering some relief to the market.
Walgreens Shines with Strong Earnings Beat
In an otherwise tumultuous market, Walgreens Boots Alliance (WBA) stood out, with shares jumping over 20% after reporting stronger-than-expected first-quarter earnings. The company posted adjusted earnings per share of $0.51, beating analysts’ forecast of $0.37. Revenue also rose by 7.5% to $39.46 billion, signaling growth despite challenges. Despite a net loss due to restructuring efforts, the market responded positively to signs of stabilization in its core pharmacy operations. Walgreens reaffirmed its full-year guidance, bolstering investor confidence.
Delta Air Lines’ Strong Outlook Lifts Airline Sector
Delta Air Lines provided a rare positive note for the markets, with shares rising 9% after the airline reported solid fourth-quarter earnings and issued a positive 2025 forecast. The company reported adjusted earnings per share of $1.85, exceeding expectations, and revenue climbed 9% year-over-year. Delta’s strong travel demand and growth in premium service revenue were key drivers of its positive forecast. The upbeat outlook also benefited United Airlines, further boosting confidence in the broader airline sector.
Tech Stocks Drag Nasdaq Lower Amid Rising Treasury Yields
The Nasdaq bore the brunt of the day’s losses, dropping 2.6% as technology stocks faced significant pressure. Nvidia and Palantir were hit hardest, falling 3.9% and 3.4%, respectively. Rising Treasury yields, fueled by stronger-than-expected December jobs data, weighed heavily on growth-sensitive tech stocks. The robust labor market, with 256,000 new jobs added in December, dampened expectations for rate cuts from the Federal Reserve, putting additional pressure on high-valuation tech stocks.
What’s Next for Investors? CPI Report and Earnings Season Ahead
As traders brace for the coming week, all eyes will be on the Consumer Price Index (CPI) report, which could provide crucial insight into inflation trends and shape expectations for future Federal Reserve actions. With earnings season ramping up, results from the tech and consumer sectors will also come under intense scrutiny. As the market reacts to key economic data and corporate earnings, investors should prepare for potential volatility in the coming days.
