Investors remain calm despite swine flu fears
NEW YORK -- Shares of airlines, cruise companies and hotels fell sharply Monday as swine flu fears infected investor sentiment on Wall Street. But panic never materialized and the broad U.S. stock market suffered just minor losses as investors bet the economic fallout would be muted barring a global pandemic.
Big stock market winners, though, included a batch of pharmaceutical and biotech firms that manufacture drugs, vaccines and diagnostic tools that combat viruses. A "Swine Flu and Bird Flu" stock index that tracks companies that seek treatments and vaccines for flu-like diseases with pandemic potential, rose 22.1%, says tickerspy.com.
Investment pros stressed that in prior health scares, such as the 2003 China SARS crisis, the spate of more recent bird flu panics, as well as hysteria related to mad cow disease, stocks have suffered only short-term declines as worst-case scenarios of global infection failed to materialize.
"We have lived through a couple of these flu scares in the past decade and they all turned out not to be too severe, and investors hope that will be the case again," says Henry Herrmann, CEO of Waddell & Reed.
Still, investors warned that it is too early to conclude that the swine flu virus, which has proved deadly in Mexico and has spread to the United States and Canada, will not morph into a global health issue with the potential to cause economic mayhem when global business conditions are already weak.
The Dow Jones industrials, which fell 90 points in early trading, rebounded to close down 51.29, or 0.6%, at 8025.
Despite the rising fear factor, the swine virus has yet to prove itself "a game changer" in terms of its ability to cause global economic havoc, says Fred Fraenkel at Beacon Trust. "Right now, people are reacting emotionally."
