Fear or Greed? Ebola Outbreak Spreads to Wall Street

Source: Thinkstock

Source: Thinkstock

Fear and greed are the two most infectious diseases found on Wall Street. They are polar opposites when it comes to market sentiment, but both take responsibility for influencing investor behavior. The latest case study of fear and greed can be seen in this year’s Ebola outbreak.

According to the Centers for Disease Control and Prevention (CDC), the 2014 Ebola outbreak is the largest in history and the first Ebola epidemic the world has ever known. Nearly 3,100 deaths and 3,630 laboratory cases have been confirmed, affecting multiple countries across West Africa. On September 30, 2014, the CDC confirmed the first Ebola case to be diagnosed in the United States.

A person who traveled from Liberia to Dallas, Texas fell ill on September 24 and sought medical attention at Texas Health Presbyterian Hospital of Dallas on September 26. After initially being sent home without being tested for Ebola, the patient developed symptoms consistent with Ebola and was admitted to the hospital on September 28. The medical facility isolated the patient and sent specimens for testing at CDC and at a Texas lab participating in the CDC’s Laboratory Response Network.

“Ebola can be scary. But there’s all the difference in the world between the U.S. and parts of Africa where Ebola is spreading. The United States has a strong healthcare system and public health professionals who will make sure this case does not threaten our communities,” said CDC Director, Dr. Tom Frieden, M.D., M.P.H., in a press release. “While it is not impossible that there could be additional cases associated with this patient in the coming weeks, I have no doubt that we will contain this.”

Wall Street wasted little time in reacting to the news and displaying symptoms of fear and greed. On Wednesday, the first trading day after the CDC confirmed the domestic Ebola case, shares of companies working on treatments soared. Shares of BioCryst Pharmaceuticals (NASDAQ:BCRX) and NewLink Genetics (NASDAQ:NLNK) jumped 4 percent and 7 percent, respectively. Sarepta (NASDAQ:SRPT) rose 3.7 percent, as the company has enough doses to treat approximately 100 patients, but requires more funding so it can increase production. Tekmira Pharmaceuticals (NASDAQ:TKMR), widely considered to have the most promising treatments in development, surged 18 percent.

Lakeland Industries (NASDAQ:LAKE), which is a global manufacturer of hazmat suits, witnessed shares surge almost 30 percent. Last month, the New York-based company revealed the U.S. government put in a significant bid for its suits.

“Lakeland stands ready to join the fight against the spread of Ebola,” said Christopher J. Ryan, Lakeland CEO. “We understand the difficulty of getting appropriate products through a procurement system that in times of crisis favors availability over specification, and we hope our added capacity will help alleviate that problem. With the U.S. State Department alone putting out a bid for 160,000 suits, we encourage all protective apparel companies to increase their manufacturing capacity for sealed seam garments so that our industry can do its part in addressing this threat to global health.

Despite the strong gains in a few medical stocks, fear was widespread. The overall market made its worst October debut since 2011 as the Dow Jones Industrial Average plunged more than 200 points. However, airline stocks were more ill than others. Shares of Southwest Airlines (NYSE:LUV), Delta Air Lines (NYSE:DAL), American Airlines (NASDAQ:AAL), and JetBlue Airways (NASDAQ:JBLU) all dropped more than 3 percent.

While headlines can certainly make investors feel like they should do something with their portfolios, it’s important not to become distracted with extreme periods of greed or fear. History shows that remaining calm is typically the best move. Unless you’re a day trader, your time and energy should be directed toward personal financial goals and aspects of life that you can influence in some capacity. Irrational behavior over events you cannot control simply contaminates long-term returns.

Follow Eric on Twitter @Mr_Eric_WSCS

More From Business Cheat Sheet:

Want more great content like this? Sign up here to receive the best of Cheat Sheet delivered daily. No spam; just tailored content straight to your inbox.