U.S. Stock Futures Drop After Trump Tests Positive for Coronavirus

By Caitlin Ostroff and Chong Koh Ping

U.S. stock futures slid after President Trump and first lady Melania Trump tested positive for the new coronavirus, adding to the political uncertainty in the final weeks before the election.

Futures tied to the S&P 500 fell 1.3% Friday, suggesting that U.S. markets could drop after the New York opening bell. The Dow Jones Industrial Average is poised to open more than 350 points lower. Contracts linked to the Nasdaq-100 also shed 2.3%.

The yield on the 10-year U.S. Treasury note edged down to 0.656%, after settling at 0.677% in the previous session. Bond yields fall as prices rise. The ICE U.S. Dollar Index, which tracks the dollar against a basket of currencies, gained 0.1%. The Japanese yen, also seen as a haven asset, gained 0.4% against the dollar.

The Cboe Volatility Index, a measure of expected swings in the S&P 500, rose 10%.

The diagnosis throws up a host of uncertainties for markets to process. Mr. Trump and the first lady are both "well at this time," according to the White House physician. But the president's age of 74 puts him at higher risk from the virus. In the final month of the 2020 campaign, Mr. Trump will need to cancel in-person events, possibly including the next debate with Democrat Joe Biden on Oct. 15.

"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, if the challenger wasn't also infected at the last debate, 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."

Meanwhile, September's jobs report showed the pace of hiring cooled last month. Employers added 661,000 jobs and the unemployment rate dropped to 7.9%, suggesting labor-market improvements from the downturn are moderating as employers confront a prolonged period of uncertainty.

Economists had projected employers added about 800,000 jobs in September and that the jobless rate fell to 8.2%, from 8.4% the preceding month.

The data give investors and voters their last monthly snapshot on the health of the labor market before Election Day.

In premarket trading, shares in investment firm Invesco rose 7.3% after The Wall Street Journal reported that shareholder activist Trian Fund Management LP has taken big stakes in it and Janus Henderson Group PLC and plans to agitate for deal making aimed at building a rival to the biggest asset managers in the world.

Investors are also more widely assessing the likelihood of a second wave of coronavirus infections, the probability of a contested election result, diminishing prospects for a new stimulus bill, and the pace of economic recovery.

Mr. Trump's infection has refocused attention on the possibility of another uptick in Covid-19 infections during the winter season, said Wei Li, head of iShares EMEA investment strategy at BlackRock.

"This morning, the news squarely brings us back to the fact that we are still in the middle of a crisis," Ms. Li said. "It's just making focus really go toward the Covid crisis."

New coronavirus cases in the U.S. topped 40,000 for the third day in a row. Total confirmed cases in the U.S. rose to nearly 7.28 million, while the death toll approached 208,000, according to data compiled by Johns Hopkins.

Congress is also looking increasingly unlikely to reach an agreement on the new aid package before the election. The House passed a $2.2 trillion coronavirus relief bill Thursday, but Republicans have panned the bill, giving it no chance of getting through the GOP-controlled Senate.

"Before we went into summer, I think markets were more hopeful about a fiscal stimulus continuation package going through," Ms. Li said. "The two sides are still very far apart, so I think markets are becoming more sober about the possibility we may not have an agreement."

Brent crude oil was down 3.4% at $39.55 a barrel and West Texas Intermediate futures, the U.S. benchmark, were down 3.4% at $37.38.

News of Mr. Trump's positive coronavirus test added to pressure on crude after heavy selling Thursday. Investors are increasingly concerned about a stalling U.S. economic recovery, rising supply from Organization of the Petroleum Exporting Countries producers and the steady drumbeat of job cuts in the energy sector, said Edward Marshall, commodities trader at Global Risk Management.

Overseas, the Stoxx Europe 600 edged down 0.7%.

Stock benchmarks in Tokyo, Australia and Singapore all fell, dropping between 0.7% and 1.4%. Markets in Shanghai, Hong Kong and South Korea were closed for holidays.

"What the market is really worried about is: What's the backup plan, will the U.S. government be able to function normally?" said You Weiren, research manager for stocks and exchange-traded funds at FSMOne.com in Singapore. He also pointed to concerns about the U.S. stimulus plans, given there is no deal yet between Republicans and Democrats.

The news has prompted a knee-jerk selloff, but the ultimate effect on the election wasn't clear, according to Eli Lee, head of investment strategy at Bank of Singapore.

One possibility is that this could help Mr. Biden hold on to his lead, lowering the risk of a contested election, Mr. Lee said. But he also noted that British Prime Minister Boris Johnson's popularity rose after he had Covid-19.

David Hodari contributed to this article.

Write to Caitlin Ostroff at [e-mail] and Chong Koh Ping at [e-mail]

(END) Dow Jones Newswires

10-02-20 0854ET