KEY POINTS

  • White House physician Dr. Sean Conley said he expects Trump to carry out his duties without disruption
  • The economy added 661,000 during September, below expectations of about 800,000.
  • Analysts watching for progress in stimulus talks in Washington

Update: 12:10 p.m. EDT:

US stocks traded lower as of noon on Friday.

The Dow Jones Industrial Average dropped 265.63 points, or 0.95%, to 27,551.27; the S&P 500 index tumbled 45.54 points, or 1.35%, to 3,335.26; and the Nasdaq fell 270.28 points, or 2.39%, to 11,056.23.

In Europe, stocks finished mixed. Britain’s FTSE-100 rose 0.39%, Germany’s DAX fell 0.33% and France’s CAC-40 edged up 0.02%

Original story:

U.S. stock markets tumbled on Friday on the stunning news that President Donald Trump and First Lady Melania Trump both tested positive for coronavirus, only a month before the election.

Just after the opening bell, the Dow Jones Industrial Average dropped 378 points, or 1.36%, to 27.438.90; the S&P 500 index tumbled 50.87 points, or 1.5%, to 3,329.93; and the Nasdaq fell 225.14 points, or 1.99%, to 11,101.37.

In Europe, the FTSE-100 was down 0.91%, Germany’s DAX dropped 1.39% and France’s CAC-40 fell 1.16%.

Crude oil futures plunged by 5%. WTI was down 5.24% at $36.69 per barrel, Brent fell 4.98% at $38.88.

On early Friday morning, Trump tweeted: “Tonight, [Melania] and I tested positive for COVID-19. We will begin our quarantine and recovery process immediately. We will get through this together!”

Just before this revelation, Trump confirmed that White House senior aide Hope Hicks had also tested positive for the virus.

White House physician Dr. Sean Conley wrote in a memo: “The President and First Lady are both well at this time, and they plan to remain at home within the White House during their convalescence.”

But Conley added that he expected Trump to “continue carrying out his duties without disruption while recovering.”

Vice President Mike Pence and second lady Karen Pence tested negative for COVID-19.

Trump’s positive test is expected to increase market volatility – as traders were already worried about a second wave of virus infections (which would presumably lead to renewed lockdown measures), as well as a chaotic presidential election.

Jeff Henriksen, CEO of Thorpe Abbotts Capital, told CNBC: “It really brings into stark reality that we are potentially going into … a second wave. President Trump getting this really highlights that in a way that I think it will focus attention back on the virus and the effects it will have.”

Investors will “debate the implications this has for [federal] stimulus, [businesses] reopening, and the election,” wrote Adam Crisafulli of Vital Knowledge. “Politically speaking, the Trump diagnosis (like the debate) is affirming and likely cements Biden’s poll lead.”

Market sentiment was also dampened by a disappointing September jobs report – the economy added 661,000 during the month, below expectations of about 800,000.

Analysts will also see how Trump’s diagnosis affects ongoing stimulus talks in Washington. Although the House passed a $2.2 trillion Democratic coronavirus stimulus package on Thursday night, senior Republicans oppose the bill. Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi said they will continue to negotiate on a final pact. Mnuchin tested negative, Pelosi told CNN on Friday morning.

Tom Block, policy strategist at Fundstrat Global Advisors, said Trump’s positive test may “jumpstart the stimulus that seems to have been bogged down. It hits home that this is not going away.”

Some traders warned of increased market volatility in the coming weeks and months.

“[Friday’s] market move is less about the election and more about the possibility that the U.S. president might become incapacitated,” said David Stubbs, head of markets strategy at J.P. Morgan International Private Bank, reported Blomberg. “This would inject significant uncertainty into the policy and geo-political outlook. That is clearly a risk-off event and markets are acting as such.”

The Chicago Board Options Exchange Volatility Index – or VIX, a measure of expected market volatility – climbed to a little over 29 as of 8:30 a.m. EDT. However, the VIX was well above 75 in March at the early stages of the pandemic.

James McDonald, CEO of Hercules Investments in Los Angeles, said Trump’s positive test “may completely change” the direction of the election campaign and adds to his “already cautious” outlook on the stock market.

“Trump contracting the coronavirus will elevate institutional money's preparation for a Democratic White House and all the tax, trade and budget implications that go along with it,” McDonald added. “We expect institutional investors to start de-risking portfolios and increasing hedges in preparation for market volatility.”

“[Trump’s infection] will induce nervousness in the markets and we could see a 10% correction in U.S. equities that will likely drag down Asian equities for the balance of the year,” said Gary Dugan, chief executive officer at Global CIO Office. “Longer-term, people will see a sharper contrast between Asian and U.S. equities. Asia has political stability and strong technology companies in the north. For people looking to allocate globally, this just makes Asia more attractive.”

Patrice Gautry, chief economist at UBP in Geneva, was more sanguine.

“If Trump is just positive but not ill, markets could rebound,” he said. “U.S. institutions are solid and Vice President Pence should lead [the] campaign and affairs if needed. Trump may continue to manage from the White House, so economically the damages are limited as long as he is just positive but not really ill.”

Roger Jones, head of equities at London & Capital, also said he does not expect Trump’s positive test to become a “lasting issue” for markets past the initial shock.

“The only way this could develop into an issue is if the election has to be postponed, then there might be a big public reaction,” he said. “However, there is over one month to election day, so it seems improbable.”

Mark Hamrick, Bankrate.com's senior economic analyst, said Trump’s positive test marks the “addition of further uncertainty when it was already abundant [and] typically toxic for financial markets.”

"If nothing else, the stock market is at some risk of heightened volatility in the coming days and weeks,” Hamrick added. “We were already expecting that with the approach of Election Day. No doubt this may exacerbate that risk amid no shortage of other sources of uncertainty and volatility."