Notes from Wall Street

"How stocks do this time depends on what plays out:

•Best-case scenario. Markets will cheer if the virus never becomes transmissible from human to human. In that case, Luskin says, investors can make money investing in companies that make vaccines and testing therapies.

Examples, he says, include Gilead Sciences, the inventor of the anti-viral drug Tamiflu, which is being stockpiled by governments around the globe; Hemispherx Biopharma, which is seeking final approval for its anti-viral drug Ampligen; and Sinovac Biotech, a Chinese vaccine maker.

•SARS-like scenario. A mild pandemic that is contained could add up to a buying opportunity, says Citigroup’s Heldman. Many of the stocks likely to decline from flu-related panic selling, such as airlines (Continental), hotels (Hilton) and shopping malls (Simon Property) would likely enjoy rebounds.

•Worst-case scenario. That’s if a full pandemic hits, the economy shuts down, people die. Airlines, hotels and other businesses that involve travel or crowds will fall sharply. Citigroup says shares of drug companies, vaccine makers, and hospital and health care stocks (Tenet, Community Hospitals) will rise. Home entertainment providers, such as Blockbuster, should fare well. So, too, could safe investments such as Treasury bonds and cash.

But, “The losers will come under severe pressure,” says Heldman. Adds Luskin: “It will be like Hurricane Katrina on a global scale.”

Woody Dorsey, behavioral market strategist at Market Semiotics, says the fact that the virus can spread quickly and cause widespread havoc means it is likely to be more damaging to the economy and financial markets than a terrorist attack or severe hurricane.

“We’re moving into a ‘bio-era’ where computer viruses, physical viruses and fear move around the world quickly,” he says. “It’s the downside of globalization.”



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