The S&P NZX 50 opened at 11376.65 on Wednesday, down 2.3 percent but has since rallied back up. By 11.30am, it was down 1.76 percent on Tuesday's close.
The drop follows Tuesday's confirmation of four cases of COVID-19 community transmission in Auckland, which saw Auckland move to alert level 3 (alert level 2 for the rest of the country).
Fisher Funds chief investment officer Frank Jasper, said although the drop reflected market uncertainty, it was "within the realms of normal".
Moves in share prices were as expected and included companies related to domestic tourism.
"[It's] companies that are more tied to the economic cycle: retailers, tourism-exposed businesses and smaller companies," he said.
On Wednesday morning, the biggest moves in share prices included Cavalier Corporation, down 17 percent, Tourism Holdings, down 11 percent and Air New Zealand, down 10 percent.
Although the impacts of COVID-19 community transmission are unlikely to be solved within three days, assuming cases are under control in a couple of weeks, Jasper expects the market to take things in its stride.
"If we start to see a more widespread outbreak, then obviously the market would take that poorly."
One of the more sensitive indicators is the New Zealand currency. Over the last 24 hours, the New Zealand Dollar (NZD) fell only slightly. This indicated international currency traders hadn't hit the panic button.
"Since it opened yesterday, New Zealand currency is about 0.4 of a percent off the US Dollar," Jasper confirmed.
In the US, interest rates rose slightly overnight. Industrial and other "economically-sensitive" companies generally out-performed those in the tech sector. The rises appear to have been timed with announcements on Jo Biden's running mate for the 2020 United States presidential election.
"The sorts of companies that benefit from a more inflationary, higher-growth, high-inflation world, those economically-sensitive companies out-perform...that's the narrative that the [US] market was running with last night," Jasper added.