United States stocks rose after US President Donald Trump’s doctors confirmed that he would leave Walter Reed National Military Medical Center later in the day, and despite contradictory messages about the severity of his coronavirus diagnosis.
Wall Street’s optimism also was heightened by the prospect of another round of massive economic relief from Congress as lawmakers and the White House continue negotiations with less than a month before Election Day.
The Dow Jones industrial average shot up 465.83 points, or 1.7 per cent, to close at 28,148,64. The S&P 500 gained 60.18 points, or 1.8 per cent, to end at 3408.60 while the Nasdaq composite climbed 257.47 points, or 2.3 per cent, to 11,332,49.
“Signalled improvements in President Trump’s health and increasing optimism around renewed stimulus talks are certainly driving the market rally today, and a widening lead of Biden in the polls is also helping to calm market jitters,” said Nicole Tanenbaum of Chequers Financial Management.
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But, as she and other analysts noted, volatility will continue as investors assess the president’s health, weigh the prospects of government stimulus and seek clarity about the November 3 US election.
September proved to be a tumultuous month of trading. Sentiment soured after a summer of explosive gains as economic data and high unemployment rates tempered recovery hopes.
Analysts have cautioned that many of the stocks that catapulted the market to record-high levels rose too high and too fast, inviting a sell-off.
And as the number of Americans who have died of Covid-19 climbed past 200,000, the business community and the broader public were receiving mixed messaging from drugmakers and the Trump administration about the timeline for safe and viable vaccine.
But reignited stimulus talks have lifted investor confidence. On Friday, House Speaker Nancy Pelosi suggested that Trump’s diagnosis could accelerate an agreement, which would potentially include government cheques sent directly to households, funding for struggling cities and states, unemployment assistance and money for hard-pressed small businesses.
Wavering economic data and large-scale corporate layoffs further underscore the pressure for Democrats and the White House to strike a deal, Tanenbaum said.
Kristina Hooper, chief global market strategist at Invesco, said she suspects Trump contracting Covid-19, the illness caused by the novel coronavirus, could lead to broader adoption of masks as average Americans recognise that if the president of the United States can contract the virus, they can too.
“More masks means less likelihood of the spread of Covid-19, which should be a significant positive for the economy,” she said.
“I also wouldn’t disagree with House Speaker Pelosi in her assessment that the president’s covid-19 diagnosis could spur Senate Republicans into recognising how virulent the disease is, which could in turn prompt them to agree to a larger stimulus package.”
Still, the president’s illness and the infection of several US senators adds yet another element of uncertainty to prolonged negotiations that have stalled before, and to the federal government’s broader response to the virus.
“While the backdrop is supportive for markets over the coming months, investors should brace themselves for near-term volatility given the uncertainty with upcoming US elections and continued concerns around a delayed economic recovery should we see a second wave of the virus,” said Frank Panayotou, managing director at UBS Private Wealth Management.
At least 209,000 people have died in the US, and nearly 7.4 million cases have been recorded.
On Friday the US Labor Department disclosed the US economy added 661,000 jobs in September, registering the smallest monthly job gains since May, a signal that the broader recovery is slowing.
Experts have pointed to the lacklustre jobs data as evidence that direct government intervention is necessary to avoid more long-term economic damage. The jobs report, which showed that the unemployment rate has dropped to 7.9 per cent, will be the last monthly summary before the November 3 election.
As news headlines change and more “October surprises” emerge, sharp moves in the markets should be expected, said Michael Farr, president of wealth management firm Farr, Miller & Washington. He noted that this year has seen 42 days of significant market swings of 2 per cent or more. “Don’t be surprised if we have more,” he said.
European and Asian markets, which also are tracking Trump’s health closely, ended in positive territory across the board.
Khoon Goh, head of Asia research at ANZ, said the initial “unknown unknowns” created a level of uncertainty “that previously no one really cared to think about”, he said.
“It prompts investors to sell first and ask questions later.”
Stock markets slumped around the world on Friday, as Trump, 74, and a number of officials close to him tested positive for the virus. The news added uncertainty to the prospects of the US economic recovery, and it called into question how much bandwidth the Trump administration would have to attend to other matters in coming weeks.
The markets appeared to take a measure of reassurance from images of Trump in a motorcade on Sunday, despite critics denouncing the photo opportunity for putting Secret Service officers at risk of infection.