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U.S. stock benchmarks traded lower, but were off the opening lows, early Friday, as investors reacted to a weaker-than-expected jobs report for September and news that President Donald Trump and first lady Melania tested positive for the coronavirus.
The news means that the 45th president and his wife will need to quarantine as the presidential election campaign enters its final weeks, and overshadows negotiations in Congress for another round of fiscal stimulus to combat the economic effects of the pandemic.
The Dow Jones Industrial Average (DJIA) were trading by about 200 points lower to reach 27,624, a decline of 0.7%; the S&P 500 index (SPX) traded off by about 32 points, or 0.9%, down to 3,350. Nasdaq Composite Index (COMP) shed 141 points, or 1.2%, to reach 11,181.
For the week, the Dow is on pace for a weekly gain of 2.4%, the S&P 500 index was looking at a rise of 2.5%, while the Nasdaq was set for a weekly advance of 3.98%, as of Thursday’s close.
A disappointing September employment report and Trump’s positive test for COVID-19 were combining to erode bullish sentiment, along with a lack of progress on new fiscal stimulus measures to help the economy recovery faster from the pandemic.
The good news is that the U.S. economy regained 661,000 jobs in September and the unemployment rate fell for the fifth month in a row to 7.9%, the government said Friday. However, the report represented the smallest recovery in the labor market since the recession began in May and raises fresh questions about the ability of the economy to bounce back quickly.
” Job growth is moderating just as fiscal aid is expiring – a toxic cocktail,” wrote Oxford Economics, economist, Kathy Bostjancic. “Despite relatively strong growth since May, employment remains a staggering 10.7 million below the pre-Covid level,” the Oxford economists said.
Economists polled by MarketWatch had predicted an increase of 800,000 jobs. Private-sector payrolls rose by a stronger 877,000, with a decline in government employment reducing the overall number. The increase in hiring in August was raised to 1.49 million from 1.37 million. The unemployment rate fell in September as people dropped out of the labor force. About 12 million jobs have been recovered since the mid-March economic shutdown that saw about 22 million layoffs.
Earlier President Donald Trump tweeted early Friday that he and the first lady had tested positive for coronavirus.
Although the White House’s doctor said that both were “doing well” and will remain in quarantine, recent reports indicated that Trump was experiencing “mild symptoms.”
“Everyone was anticipating the October surprise. Still, honestly, this one came flying in from the left-field, not only caching virtually everyone flatfooted but probably hit at the most vulnerable time of the week as a risk had turned off due to the fiscal impasse,” wrote Stephen Innes, an independent market strategist.
Some investors are making the case that Trump’s forced quarantine, as he deals with the deadly illness, could hurt his election campaign efforts as the race for the White House with challenger former Vice President Joe Biden heats up headed into the Nov. 3 election.
“The concern for equity market bulls is that while Trump is in self isolation, he will lose at least 10 days of campaigning at a critical moment as elections loom large, with polls and betting odds already suggesting Joe Biden is leading the race.” wrote Fawad Razaqzada, market analyst at ThinkMarkets, in a Friday note.
Trump’s response to the coronavirus pandemic has been sharply criticized, although he has often hailed his own management of the health crisis. To date, the U.S. has recorded more than 7.27 million cases of the coronavirus, with 207,808 related deaths, according to data compiled by Johns Hopkins University. In testing positive for the coronavirus, Trump, who is 74, follows U.K. Prime Minister Boris Johnson, 56, and Brazilian President Jair Bolsonaro, 65.
The diagnosis forces investors to reassess the likelihood of a Biden victory and its implications for markets, since Trump was widely viewed as a business-friendly president and the former vice president was considered more likely to raise taxes and increase regulations.
“The markets evidently support the business-friendly President, otherwise we will not have seen much of a reaction,” Razaqzada said.
“Just when you thought things couldn’t get more chaotic, we got the news late last night that the President, his wife, and an aide tested positive for COVID,” wrote Paul Hickey, analyst at Bespoke Investment Group, in a Friday research note.
The development comes amid an impasse in Washington with the House passing a $2.2 trillion Democratic coronavirus stimulus bill Thursday night that Republicans in the Senate are almost sure to reject. That is is likely to scuttle a deal even as House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin agreed to continue negotiations.
One strategist speculated that one potential silver-lining from Trump’s diagnosis would be if the president’s contracting disease forces lawmakers to focus more acutely on another fiscal stimulus package.
“However, markets could have some unexpected reactions as this could break the log jam in current stimulus negotiations,” wrote Jamie Cox, managing partner for Harris Financial Group, in emailed comments.
Indeed, Pelosi was suggesting that stimulus talks could continue to progress , injecting some degree of optimism in the market, on an otherwise grim trading day.
“This kind of changes the dynamic because here they see the reality of what we have been saying all along,” Pelosi told MSNBC in a Friday interview. “We’ll find our middle ground. We’re legislators. We’ll get the job done,” she said.
The 10-year Treasury note yield (BX:TMUBMUSD10Y) was virtually unchanged at 0.68%. Bond prices move inversely to yields.
U.S. benchmark crude futures for November delivery (CRUD)(CLX0) fell $1.52, or 4%, to trade at $37.20 a barrel on the New York Mercantile Exchange, amid concerns about rising case counts. Gold futures for December delivery (GCZ0) fell 0.5% to $1,906 an ounce, after rising 1.1% on Thursday.
The ICE U.S. Dollar index (DXY) a gauge of the greenback’s strength against a basket of currency trading partners, was trading flat, paring some slight gains from earlier.