Topline
The announcement that President Donald Trump tested positive for coronavirus triggered a sell-off in early morning trading around the world on Friday that tapered off by day’s end. Tech stocks, however, failed to recover, as Wall Street investors prepare for increased volatility in the weeks leading up to the election.
The Financial District in Manhattan on October 01, 2020
Key Facts
The tech-heavy Nasdaq ended the day down 251 points, or 2.2%, while the Dow Jones Industrial Average shed 134 points, or 0.5%, and the S&P 500 fell 1%.
Tech stocks were among Friday’s biggest losers, with Tesla and Netflix falling 7% and 5%, respectively, while Apple and Microsoft were each down 3%.
Cboe’s VIX Index, which measures volatility expectations based on options contracts, at one point jumped up more than 7%, reaching its highest point since early September, when tech stocks corrected and the Nasdaq had its fastest 10% plunge in history.
U.S. airline stocks proved a bright spot in the Friday market after House Speaker Nancy Pelosi said lawmakers were preparing relief for the industry through either a broad-based stimulus bill or standalone legislation.
The S&P 500 Airlines Industry Index ended the day up 2.3%.
Jobs data released before the market open revealed that U.S. employers added just 661,000 jobs in September, about 25% less than the 859,000 new jobs economists were forecasting and less than half of the nearly 1.5 million jobs the economy added back in August.
The unemployment rate of 7.9% was better than the forecast of 8.2%, but it’s still far below the 3.5% unemployment rate in February–before governments shut down businesses after a domestic spike in coronavirus cases.
Key Background
President Donald Trump announced in a tweet shortly after midnight on Friday that he and First Lady Melania had tested positive for Covid-19, adding that they’d begin quarantining “immediately.” The announcement triggered an immediate sell-off in stock futures and initially rattled global equity markets, but losses have since pulled back: Japan’s Nikkei Index closed down about 0.7%, but France’s CAC 40 and the United Kingdom’s FTSE 100 managed to turn positive for the day, though their gains remained below 1%. The Dow and S&P 500 each ended Thursday, the first day of fourth-quarter trading, virtually flat after stimulus negotiations between House Speaker Nancy Pelosi (D-Calif.) and Treasury Secretary Steven Mnuchin reached a standstill. September was the worst month for U.S. stocks since May, and history has shown that October is generally a volatile month for stocks–even more so during election years.
Crucial Quote
“The news of President Trump contracting Covid-19 could completely change the direction of the campaign and adds to our already cautious outlook on the stock market,” said James McDonald, the CEO of Los Angeles-based Hercules Investments. “[It] will elevate institutional money’s preparation for a Democratic White House and all the tax, trade and budget implications that go along with it. We expect institutional investors to start de-risking portfolios and increasing hedges in preparation for market volatility.”
Further Reading
Trump’s Covid Diagnosis Rattles Markets: Here’s What Wall Street Thinks Happens Next (Forbes)
Here’s What The Last Jobs Report Before The Presidential Election Means For Voters (Forbes)
U.S. Futures, European Stocks Drop Following Trump’s Covid-19 Diagnosis (Forbes)
Dow Futures Down 400 Points After Trump Tests Positive For Covid-19 (Forbes)
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