Ebola fears likely to become less scary for US investors

Fri Oct 24, 2014 5:33pm EDT
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By Yasmeen Abutaleb

NEW YORK Oct 24 (Reuters) - Market fluctuations eased on Friday and the Standard & Poor's 500 index ended its best week in almost two years as fears dwindled that the first Ebola diagnosis in New York could lead to widespread contagion in the nation's financial capital.

The market's favored gauge of anxiety, the CBOE Volatility Index, dropped from readings above 30 on Thursday to about the average daily level at 16.63 on Friday, while options activity suggested low expectations for volatility, signaling that investors no longer assign a high probability to wild shifts based on Ebola news.

To be sure, Ebola fears may still provide a trigger for temporary bouts of selling. The sharp selling in futures and broad-market exchange-traded funds on Thursday suggests a sensitivity that still exists - to a point. And those fears could revive in the event other Ebola sufferers turn up in the U.S., particularly any that can't be attributed to health care workers or people from West Africa.

"Ebola is really center stage as the No. 1 fear of the market right now because of the immediate reaction we've had to it," said John Kosar, director of research with Asbury Research in Chicago. "It's been more immediate and severe than any of the geopolitical tensions we've seen."

After the possible Ebola diagnosis in New York was reported on Thursday, the S&P 500 SPDRs exchange-traded fund traded about 2.56 million shares at 2:56 p.m. -- the busiest minute of the day other than the 4 p.m. close.

But the decline was limited to a move of about 0.6 percentage point, and stocks still ended higher, up 1.2 percent.

At 8:50 p.m. ET (0050 GMT), there was confirmation that Dr. Craig Spencer, 33, had contracted Ebola. S&P futures fell about 13 points in 20 minutes, but did not translate to declines Friday, as the S&P rose 0.7 percent, on its way to a 4.1 percent gain for the week, the best since January 2013.

New York and New Jersey will bolster screening for Ebola beyond federal requirements for travelers from West Africa arriving at the area's airports, New York Governor Andrew Cuomo said on Friday.   Continued...