With all the news about Ebola — new U.S. victims, forecasts of a massive number of infections overseas, conflicting claims about the potential for a domestic outbreak, an administration in search of a strategy to fight the virus — there’s one place the deadly disease has struck that hasn’t gotten all that much attention. That place is Wall Street.
At one point today, Wednesday, the Dow had tumbled some 450 points. The Nasdaq had dropped more than 2.5%. And while stock watchers pointed to a number of downward pressures, the growing concern about Ebola was acknowledged by many as an ominous culprit in the sell-off.
As was noted on cnbc.com, the fear factor is definitely at play:
“…the [stock market] index widely considered the best gauge of fear in the market, rose as much as 35 percent to trade above 30, its highest level since November 2011.”
The Wall Street Journal’s “Money Beat” also deals with the major role that fear plays in a market vulnerable to the emotions of the masses:
“In a world gripped by Ebola fear, it’s worth remembering that the bigger threat to the global economy and markets lies not with people afflicted by the virus but with those who aren’t.
“Economists and public health experts have learned much from recent epidemics…the indirect costs of public risk aversion can generate far more economic damage than the direct cost of healthcare outlays and other containment expenditures.”
“The arrival of Ebola in the U.S. has coincided with a period of extreme turbulence in the stock market, which has tumbled about 8% from record highs.
“The deadly virus is clearly not the only factor behind the market slide, but it’s a major unknown that is increasingly weighing on market psychology.”
CNBC notes how Ebola worries are prompting a flight to safety for many investors whose confidence has been shaken in the government’s handling of a potential U.S. outbreak:
“Concerns the U.S. government and health professionals have not dealt quickly or carefully enough with Ebola sent investors into bonds and added to the pressure on a stock market already slammed by global growth concerns.
“‘Obama has canceled a trip, and the CDC is making a statement. That has made people anxious. Confidence in Washington right now is not good. When it’s a health-care issue, it affects all of us,’ said Ward McCarthy, chief financial economist at Jefferies.”
And when it was announced that the latest U.S. Ebola patient to be hospitalized with the virus traveled on a crowded commercial flight the night before showing symptoms, airline stocks hit severe turbulence.
“News that a health worker diagnosed with Ebola flew on a commercial flight raised fear among airline investors that the scare over the virus could cause travelers to avoid flying.
“Shares of the biggest U.S. airlines tumbled between 4 percent and 6 percent in afternoon trading.”
A post at bloomberg.com points out that a big problem in the current market environment is the inability to quantify in any meaningful way how much of an economic impact the current Ebola crisis will have:
“‘Investors struggling to assess global growth and the end of Federal Reserve bond buying have been blindsided with a threat that defies quantification,’ said Howard Ward, chief investment officer for growth equities at Rye, New York-based Gamco Investors Inc.
“’There is nothing in business school or a CFA textbook addressing how to handicap Ebola,’ Ward said in an e-mail. ‘I doubt stocks can sustain an advance until the news gets better.’”
And when it comes to putting a dollar figure on the economic hit the world might take because of Ebola, the New York Times says the picture is not a pretty one:
“The most authoritative model, at the moment, suggests a potential economic drain of as much as $32.6 billion by the end of 2015 if “the epidemic spreads into neighboring countries” beyond Liberia, Guinea and Sierra Leone, according to a recent study by the World Bank.”
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