Wall Street closes lower after Trump tests positive to COVID-19

US stocks closed lower after Donald Trump tested positive for coronavirus, jolting investors, but indexes still notched gains for the week.

The positive tests for Donald Trump and First Lady Melania Trump have ramped up uncertainty ahead of the election. Picture: AFP

US stocks fell after President Donald Trump said he and the first lady tested positive for coronavirus, but all three major indexes held on to notch gains for the week.

The overnight development jolted investors and added to the political uncertainty about a month ahead of the election. For now, some investors’ initial impulse has been to sell stocks and pare back risk as they grapple with the implications of President Trump’s infection.

At its lowest point of the session, the Dow Jones Industrial Average was down more than 400 points. The blue chip index recouped much of those losses after House Speaker Nancy Pelosi issued a statement asking airlines to hold off on furloughs and firings as Congress works on an aid package for the industry, sending shares of those companies higher.

The Dow ended down 134.09 points, or 0.5 per cent, to 27682.81, its first loss in three days. Gains from recent sessions helped push the Dow up 1.9 per cent for the week, halting a four-week losing streak. European stocks were mixed.

Investors’ concerns range from how the government will function if President Trump’s condition worsens to whether other senior government officials are at risk, some analysts said. There are also worries about whether the development raises the stakes of a contested election or a delay, others added.

Not long after markets opened, chief of staff Mark Meadows told reporters that Mr. Trump was showing mild symptoms and remained in good spirits.

“Markets hate uncertainty,” said Lisa Erickson, head of the traditional investment group at US Bank Wealth Management who predicts even more volatility for markets in the final stretch of the election season.

Tom Lee, managing partner at Fundstrat Global Advisors, called the sell-off a knee-jerk reaction, in a note to clients.

But Mr Lee said there could be a silver lining: Mr. Trump falling ill repudiates sceptics of masks, personal protection gear and social distancing. That could help contain the recent surge in cases and might push down the path of cases.

New coronavirus cases in the US topped 40,000 for the third day in a row. Total confirmed cases in the US rose to nearly 7.28 million, while the death toll approached 208,000, according to data compiled by Johns Hopkins. Those developments have also been weighing on markets, analysts have said.

Investors were also parsing data showing job creation slowed last month. Employers added 661,000 jobs in September, below economists’ expectations of about 800,000 and the first time since April when net hiring was below 1 million.

On one hand the data solidified the view that economic activity continues to rebound albeit at a slowing rate. On the other, it doesn’t include the glut of lay-offs announced by companies in recent days, including Disney, American Airlines and Allstate, potentially putting a dent in job creation for October.

The S&P 500 also closed lower, falling 32.36 points, or 1 per cent, to 3348.44. The Nasdaq Composite slid 251.49 points, or 2.2 per cent, to 11075.02. Both indexes remained up for the week, gaining 1.5 per cent.

Tech stocks bore the brunt of Friday’s sell-off, as investors pulled back from the market’s most overheated sector. Shares of Apple fell $3.77, or 3.2 per cent, to $US113.02, Adobe declined $US20.52, or 4.1 per cent, to $US478.99 and several chip makers also racked up losses.

Travel stocks recouped some ground after Mrs. Pelosi’s comments. Carnival swung higher, rising 13 cents, or 0.9 per cent, to $US15.16. Delta Air Lines added 65 cents, or 2.1 per cent, to $US31.75, while American Airlines Group rose 42 cents, or 3.3 per cent, to $US13.

Investment firm Invesco, meanwhile, rose 60 cents, or 5.3 per cent, to $US11.85 after The Wall Street Journal reported that shareholder activist Trian Fund Management has taken big stakes in it and Janus Henderson Group and plans to agitate for deal making aimed at building a rival to the biggest asset managers in the world.

Investors sought safety in some of the traditional market veins. Utility stocks rose 1.1 per cent and real-estate stocks added 1.6 per cent in the S&P 500. Bond yields also rose, paring a slide from earlier in the session. The yield on the 10-year U.S. Treasury note settled at 0.694 per cent from 0.677 per cent Thursday.

In the final month of the 2020 campaign, Mr. Trump will need to cancel in-person events, potentially including the next debate with Democrat Joe Biden set for October 15. The president’s age of 74 puts him at higher risk from the virus.

“It just creates a wider range of outcomes or changes the probabilities of the election,” said Hani Redha, a portfolio manager at PineBridge Investments. “It injects a lot of uncertainty of how it plays out.”

Mr Biden -- who has had a lead in the polls so far -- could benefit from continuing to campaign while Mr Trump is sidelined,” Mr. Redha said. “If this does put Trump out of action, but not Biden, then those odds will only continue to move in that direction.”

Mr Lee said he believes his clients perceive a win by Mr Biden as being better for markets, but only if Democrats don’t control the House and the Senate. Mr Biden would likely be stronger on healing the ongoing social divide in the US, he said. But a sweep of Congress and the White House would put major legislative changes on the table, potentially upsetting markets, Mr. Lee added.

Dow Jones Newswires