US STOCKS-Wall St tumbles on Ebola fears; small caps drop

Wed Oct 1, 2014 4:38pm EDT
 
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By Caroline Valetkevitch

NEW YORK Oct 1 (Reuters) - U.S. stocks dropped more than 1 percent on Wednesday as the first diagnosis of Ebola in a patient in the United States spooked investors, economic data pointed to uneven growth, and the Russell 2000 index entered correction territory.

The Ebola news pressured shares of airlines and other transportation names, with the NYSE ARCA Airline index falling 3.1 percent, the biggest percentage decline since January. The Dow Jones transportation average dropped 2.5 percent, its biggest daily percentage drop since February.

Small-cap stocks extended recent losses and the Russell 2000 closed more than 10 percent below its closing high of 1,208.65 in early March, which puts the index in correction territory. It was down 1.5 percent on the day.

"The small caps have lost the leadership, and a lot of it is the lack of liquidity with those issues. There's much more liquidity in the large caps right now, and when you're experiencing volatility, institutions tend to run toward the large caps," said Bruce Zaro, chief technical strategist at Bolton Global Asset Management in Boston.

The latest decline was the S&P 500's third in a row and followed signs of an uneven expansion in the U.S. economy. Growth in U.S. factory activity slowed more than expected in September even as hiring in the private sector accelerated.

The CBOE Volatility index, Wall Street's fear gauge, ended up 2.5 percent.

The day's losses were broad, with all of the 10 S&P 500 sector ending in the red except for utilities.

Among airline stocks, Southwest Airlines fell 3.6 percent to $32.55 and Delta Air Lines dropped 3.5 percent to $34.90.   Continued...