Wall Street was worried on Friday when a new highly-mutated detected in South Africa prompted some countries to impose travel bans, triggering fears that a resurgence of the virus could derail the global economy's recovery.
The Cboe Volatility Index, or VIX, helps measure the level of fear among investors and it jumped as much as 54% during trading on Friday to 28.62. The gauge is close to 42, its largest intra-day increase since January 2021, before COVID-19 vaccines were readily available for most Americans, and it marks the highest level since May 2021 for the index, although it is still well below the levels seen in the early days of the Pandemic in April 2020.
The new variant found in South Africa, known as a high number of mutations, has spread quickly among young people, according to health officials.
On Friday, the World Health Organization held an emergency meeting to discuss the potential risks of the new variant now called omicron and ultimately decided to label it as a highly transmissible virus of concern. Early evidence indicates an increased risk of a contagious disease.
While it wasn't immediately clear how effective the vaccines were against the new variant, mRNA vaccines such as those developed by Pfizer and Moderna can be updated easily.
The economic impacts of the new strain, which has been found in Hong Kong, Belgium and Israel, as well as South Africa, were already felt on Friday, with at least 10 European nations suspending air travel from southern Africa. The 27-nation European Union has also recommended an emergency brake on travel from southern Africa, citing the very worrying new variant.
On Monday, the U.S. will restrict travel for non-citizens from South Africa. President Biden was briefed by White House chief medical adviser Dr. Anthony Fauci about the matter.
The economic recovery has been quite impressive, and the one thing that could knock it over completely would be a more dangerous variant, said Ryan Detrick, chief market strategist for LPL Financial. Time will tell how worried we are, but investors are selling in front of potential bad news. The Dow Jones Industrial Average was down 905 points, or 2.5%, for its largest one-day point and biggest drop since October 2020. The S&P fell by 2.27%, which is its largest one-day decline since October 2020. The tech-heavy Nasdaq Composite fell 2.23%.