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Dow Futures Sink Over 400 Points Amid Weak Jobs Report

U.S. stock-index futures traded sharply lower early Friday, as were global equity markets, 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.

How are stock indexes trading?

Futures for the Dow Jones Industrial Average were trading 466 points lower to reach 27,223, a decline of 1.7%; those for the S&P 500 index were off 56.70 points, or 1.7%, to 3,310. Nasdaq-100 futures were declining by about 262 points lower, or 2.3%, to reach 11,312.75.

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 Composite Index was set for a weekly advance of 3.98%, as of Thursday’s close.

What’s driving the market?

Disappointing jobs numbers and Trump’s contraction of COVID-19 were combining to erode the bullish complexion of the market, against a lack of progress on new stimulus to help the economy recovery faster from the pandemic.

The good news is that the 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 advance since a recovery began in May and raises fresh questions about the ability of the economy to stage anything resembling strong rebound from the coronavirus-induced recession. 

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. Hours worked rose 0.1 hour to 34.7 hours. The increase in hiring in August was raised to 1.49 million from 1.37 million. Job gains in July were lifted to 1.76 million from 1.73 million.

Meanwhile, President Donald Trump tweeted early Friday that he and the first lady had tested positive for coronavirus.

The White House’s doctor said that both were “doing well” and will remain in quarantine.

“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.

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 a 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.  

Meanwhile, investors were bracing for what would have been the main attraction in Friday’s dealings: the September unemployment report from the U.S. Labor Department.

Economists surveyed by MarketWatch expect the economy added 810,000 jobs in September, down from 1.37 million in the prior month. The unemployment rate is expected to drop to 8.2% from 8.4% in August.

Which stocks were in focus?
  • Shares of avocado producer Mission Produce were in focus on Friday after trading began on Thursday.
  • Tesla’s stock was in focus after the company released vehicle sales results, showing that the electric-vehicle marker sold some 124,100 Model 3s and Ys.
  • Walmart shares were on the move after the retailer on Friday announced a deal to sell its U.K. supermarket chain Asda, which finally rids the U.S. giant of a unit it has long wanted to sell.
  • Uber Technologies said it received $500 million for Uber Freight from Greenbriar.
How are other markets trading?

The 10-year Treasury note yield was off 2.1 basis points at 0.66%. Bond prices move inversely to yields.

U.S. benchmark crude futures for November delivery fell $1.50, or 3.7%, to settle at a two-week low of $38.72 a barrel on the New York Mercantile Exchange, amid concerns about rising case counts. Gold futures for December delivery edged back 0.1% to $1,913 an ounce, after rising 1.1% on Thursday.

In global equities, the Stoxx Europe 600 index was trading 0.6% lower, while the U.K.’s FTSE 100 retreated 0.7%.

The ICE U.S. Dollar index, a gauge of the greenback’s strength against a basket of currency trading partners, was trading flat, paring some slight gains from earlier. 

 

Source: Marketwatch


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