Stocks Shrug Off President's Covid Case

By Matthew Klein |  Friday, October 2

Abundance of Caution. Stocks have generally brushed off Covid-19 fears in recent months, but Friday was still jarring. President Donald Trump tested positive for coronavirus, and the Dow Jones Industrial Average spent much of the day nearly flat. The Dow did sell off later in the afternoon but finished off just 0.5%, or 134 points. 

While the S&P 500 index was down 1%, the majority of stocks in the index (313) were up, as were six of the 11 sectors (energy, financials, industrials, materials, real estate, and utilities).

Markets closed before the news that the president was headed to Walter Reed Medical Center “out of an abundance of caution.” Other White House officials, Congressmen, and even some members of the press corps have also tested positive.

Ultimately, the market only fell because of tech, which plays an increasingly outsized role in the S&P. Of the 20 biggest losers, 15 were software or semiconductor names: Activision Blizzard, Netflix, Analog Devices, Maxim Integrated, Adobe, Nvidia, Applied Materials, Ansys, AMD, Take-Two Interactive Software, Autodesk, KLA Corporation, Skyworks Solutions, Qualcomm, and Qorvo.

Meanwhile, rising long-term treasury yields and higher copper prices suggested a measure of economic optimism. Moreover, inflation doesn’t seem to be top of mind for traders, which could be why precious metals and energy prices were down while the dollar was flat.

But Friday's jobs data show that the recovery continues to slow, with most analysts using some variation of the phrase “waning momentum” to describe the numbers. Employment growth in the past three months has averaged only 1%, compared to 4% each month in May and June. Only about half of the jobs lost in March and April have been regained, and many of the people still saying they are on “temporary layoff” have been jobless for more than three months.

In fact, the government’s measure of total employment that comes from asking people whether they have jobs—which is different from the payroll number based on surveys of businesses—may actually have dropped in September after correcting for potential misclassifications of workers who claims to be “employed with an unpaid absence.”

The good news is that future changes to fiscal policy could push against the current weakness. While it’s unlikely anything will happen until next year, analysts seem increasingly optimistic about the country’s growth prospects under unified Democrat control. Goldman Sachs, for example, wrote that Joe Biden’s proposed policies would “boost output substantially” compared to the current baseline.

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