Stocks lost ground in early trading on Friday as investors sought to assess the impact of President Donald Trump testing positive for the coronavirus.
The Dow fell 217 points, or 0.8%, to 27,599 in early trading. The broad-based S&P 500 index also lost ground, declining 0.7%, while the tech-heavy Nasdaq declined 1%.
Mr. Trump's diagnosis injects another layer of uncertainty into the presidential election just 32 days from now. Wall Street is also weighing whether his illness could impact the outcome of negotiations in Washington over another round of fiscal stimulus, with Democrats and Republicans seeking to hammer out the differences over the $2.2 trillion HEROES Act. The Democrat-controlled House passed the measure on Thursday.
"There has been some excitement this week about chances of last minute compromise," said TD Securities head of strategy Richard Kelly in a research note. "During quarantine, Trump may be less able to 'put a deal together.' Thus, at the margin, we would argue that it lowers the odds of stimulus."
Failure by Congress to clinch a stimulus deal could weigh on the economy and the labor market, according to economists. The HEROES Act includes $25 billion to bolster airlines' payrolls as well as aid for small businesses, education and other industries. American Airlines, United and other airlines began furloughing tens of thousands of workers on Thursday.
The HEROES Act would also renew $600 in extra weekly unemployment aid that expired in July and direct more money to cash-strapped households in the form of a $1,200 stimulus check.
Thousands of airline workers lose their jobs
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Meanwhile, the labor market is showing signs of headwinds as the coronavirus pandemic continues. On Friday, the Labor Department said employers added 661,000 jobs in September, lower than the 850,000 expected by economists and the third month of slowing job gains. While the jobless rate declined, that was mostly due to 700,000 workers dropping out of the labor market.
"At the current slowing rate of job growth and expected continued drag from austerity as federal policymakers fail to act, weakness in the labor market is expected to drag on for years and those workers will be left out in the cold well before they are able to get back on their feet," said Elise Gould, senior economist at the left-leaning Economic Policy Institute, in a blog post.
More election turmoilFor investors, perhaps the key question is whether Mr. Trump's illness will impact his re-election efforts, given that his COVID-19 diagnosis may hurt his ability to campaign just weeks before the November 3 vote.
"Betting markets show that Trump's chances of getting re-elected declined by 6% overnight," Kelly of TD Securities noted.
Analysts said some of the market's movements could be explained by investors putting their money on Joe Biden taking the White House. That could mean higher tax rates and tighter regulations on companies, which would limit profits and hurt stock prices.
Even so, Mr. Trump's illness might not ultimately prove to be a positive for Mr. Biden, Kelly noted. He added, "Other world leaders such as [U.K. prime minister Boris] Johnson and [Brazil president Jair] Bolsonaro got a significant boost in their approval ratings after they got COVID."
—With reporting by The Associated Press.