Nov. 26, 2021, 2:24 p.m. EST

Travel stocks slump and vaccine maker stocks rally as WHO names new ‘variant of concern’

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By Steve Gelsi

Shares of airlines fell and vaccine makers rose Friday as investors reacted to fresh travel bans related to a variant of the coronavirus that causes COVID-19 called B.1.1.529 that has been identified in South Africa.

Meanwhile, stocks relating to ‘stay-at-home’ activities gained.

The CBOE Volatility Index VIX jumped by about 50% Friday, trading around 27.70, which would mark the highest level for the index since October 2020. The index, also known as the VIX, for its ticker symbol, has become well known as Wall Street’s “fear gauge” since it was created in the early 1990s.

The UK government has banned flights from South Africa and five other southern African countries, the Associated Press reported. The U.S. followed suit shortly, announcing travel restrictions from South Africa and seven other African nations starting Monday “out of an abundance of caution.”

The World Health Organization also on Friday assigned the variant the Greek letter omicron and said it had been designated a “variant of concern.”

“A lot of eyes will be on how severe it is and whether it completely evades vaccines,” analysts at Deutsche Bank said Friday in a research note. “At this stage very little is known. Mutations are often less severe so we shouldn’t jump to conclusions but there is clearly a lot of concern about this one.

“Also South Africa is one of the world leaders in sequencing so we are more likely to see this sort of news originate from there than many countries. Suffice to say at this stage no one in markets will have any idea which way this will go.”

The strain has reached 90% of cases in Gauteng, which is the smallest province in South Africa with more than 1,000 cases a day being estimated, according to Evercore analyst Josh Schimmer.

The strain may have evolved in an immune-compromised patient and has 32 mutations in the spike protein (including some in the RBD) “and is reportedly the ‘most distant’ (i.e. mutated) from the original strain yet,” Schimmer wrote in a note to clients. “It has RBD and NTD mutations associated with resistance to neutralizing antibodies, and has potentially enhanced transmission.”

Pfizer /zigman2/quotes/202877789/composite PFE +1.31% advanced by 6%, and Moderna /zigman2/quotes/205619834/composite MRNA +0.02% rallied 21% on the news.

United Airlines /zigman2/quotes/205037281/composite UAL +0.68% stock led losses among airline stocks, down 10% and poised for its lowest close since Feb. 2 and on track for its largest one-day percentage increase since June 11, 2020. Southwest Airlines /zigman2/quotes/201071949/composite LUV -1.69% fell 4%, American Airlines /zigman2/quotes/209207041/composite AAL +1.29% stock slumped 9%, and Delta Air Lines /zigman2/quotes/200327741/composite DAL +0.95% lost 8%

Aircraft maker Boeing /zigman2/quotes/208579720/composite BA +0.89% shares retreated by 5%, and Expedia /zigman2/quotes/202291990/composite EXPE +0.33% fell 9%. Norwegian Cruise /zigman2/quotes/204183397/composite NCLH +0.76% gave up 9.8% and Royal Caribbean /zigman2/quotes/208854639/composite RCL +0.20% shares slid 10%.

Netflix /zigman2/quotes/202353025/composite NFLX +5.94% rose 2% and Take-Two Interactive Software /zigman2/quotes/204008930/composite TTWO +0.28% rose by 3.3%.

Claudia Assis in San Francisco contributed to this report

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