President Trump’s coronavirus infection adds a significant element of uncertainty to the conduct of business in Washington. With just four weeks to go before the election, the campaign for re-election is essentially suspended, the confirmation of his Supreme Court nominee is clouded by the infection of several senators who must vote in-person, and potentially clouds discussions about another stimulus package.
Stocks slipped on Friday as news of the president’s condition was released. The S&P 500® index fell 1.0 percent. The September jobs report was also released on Friday and may have contributed to the weaker tone. Both the VIX and DXY indices rose slightly. Futures on Monday indicate that stocks may retrace more than half of Friday’s losses. And stocks are trading higher in Europe, after a mostly positive Asian session. 

Mixed Jobs Report Shows Signs of a Slowdown in the Recovery; Certain Sectors in Need of Government Support 

The September jobs report showed the creation of 661,000 new non-farm jobs, well below the Bloomberg consensus forecast of 859,000. However, including revisions from the prior two months the total rose to 806,000 new jobs. The pace of jobs growth did slow significantly from the previous two-month average of 1,625,000 and the prior three-month average of 2,677,000, evidencing a clear deceleration in the pace of labor market recovery. Some deceleration was to be expected as the snapback in activity from the economic lockdown moderates. The participation rate fell back to July’s level, 2 percent below February’s level. 

September’s report included the loss of 280,000 public sector education jobs, and another 69,000 in the private sector, as state and local government revenues have come under severe pressure due to the virus induced decline in economic activity. Another 34,000 jobs related to the census were also lost. Although the total number of non-farm jobs throughout the economy is down by 10.7 million from its February peak, the private sector components of the report were somewhat more encouraging. Job gains were seen in leisure and hospitality, retail, healthcare and professional and business services. Including revisions, private sector employment rose 917,000. And both the length of the average workweek and average hourly earnings rose 0.1 percent. 

Nevertheless, it is clear that the parts of the economy most directly affected by the pandemic are most in need of additional government support, including small business, state and local governments, airlines, leisure and hospitality workers, and retail. And more than half the states are currently reporting increases in infections, especially in but not limited to, the upper Midwest, as the weather turns colder and the annual flu season gets underway. The two parties in Washington are at least talking about a stimulus package, and Speaker Pelosi has indicated some relief for the airlines will happen. But the parties apparently remain far apart in the size of the total package, and where the funds should be directed.
Consumer Confidence Shows its Largest Gain in Nearly Two Decades; Stocks Delivered Solid Gains in the 3rd Quarter 

There were some additional bright spots in last week’s economic data. The Conference Board’s measure of consumer confidence saw its largest gain in 17 years. Pending home sales exceeded already lofty expectations. Both weekly and continuing jobless claims fell. And although the ISM manufacturing report eased slightly from the prior month, it remained strong, and motor vehicle sales rose solidly. 

And while it was always likely to be a challenge for equity prices to exceed the exceptional gains of the second quarter, stocks did deliver solid gains in the third. The S&P 500 index climbed 8.5 percent despite a 3.9 percent loss in September that included a 9.6 percent pullback between the 2nd and 23rd. 

The Atlanta Fed’s GDPNow model anticipates annualized growth in the quarter will total 34.6 percent. Nevertheless, according to Factset, corporate earnings are still expected to fall by 21 percent compared to last year. But that is an improvement from the start of the quarter forecast of -25.3 percent. Revenue is expected to decline 3.6 percent. Looking ahead, earnings are forecast to decline 12.7 percent in the fourth quarter before turning positive in the first quarter of next year. 

The vice-presidential debate is scheduled for this Wednesday, and the release of the minutes from the Fed’s September meeting, also on Wednesday, headlines a light economic calendar. 

Important Disclosures:
Sources: Factset, Bloomberg. FactSet and Bloomberg are independent investment research companies that compile and provide financial data and analytics to firms and investment professionals such as Ameriprise Financial and its analysts. They are not affiliated with Ameriprise Financial, Inc.

The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Ameriprise Financial associates or affiliates. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether for its own account or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not account for individual investor circumstances. 

Some of the opinions, conclusions and forward-looking statements are based on an analysis of information compiled from third-party sources.  This information has been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Ameriprise Financial. It is given for informational purposes only and is not a solicitation to buy or sell the securities mentioned. The information is not intended to be used as the sole basis for investment decisions, nor should it be construed as advice designed to meet the specific needs of an individual investor. 

An index is a statistical composite that is not managed. It is not possible to invest directly in an index.

Definitions of other individual indices mentioned in this article are available on our website at ameriprise.com/legal/disclosures in the Additional Ameriprise research disclosures section, or through your Ameriprise financial advisor.

Past performance is not a guarantee of future results.

The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) is a widely used measure of market risk. It shows the market's expectation of 30-day volatility. The VIX is constructed using the implied volatilities of a wide range of S&P 500 index options.

The U.S. dollar index (DXY) is a measure of the value of the U.S. dollar relative to the value of a basket of currencies of the majority of the U.S.'s most significant trading partners - Euro, Swiss Franc, Japanese Yen, Canadian dollar, British pound, and Swedish Krona.

ISM Manufacturing Index, which used to be called Purchasing Manager's Index (PMI), measures manufacturing activity based on a monthly survey, conducted by Institute for Supply Management (ISM), of purchasing managers at more than 300 manufacturing firms.The ISM is an index of the prevailing direction of economic trends in the manufacturing sector. The purpose of the ISM is to provide information about current and future business conditions to company decision makers, analysts, and investors.

The GDPNow forecasting model provides a "nowcast" of the official GDP estimate prior to its release by estimating GDP growth using a methodology similar to the one used by the U.S. Bureau of Economic Analysis. GDPNow is not an official forecast of the Atlanta Fed. It is best viewed as a running estimate of real GDP growth based on available economic data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model.

Third party companies mentioned are not affiliated with Ameriprise Financial, Inc.

Investment products are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.

Ameriprise Financial Services, LLC. Member FINRA and SIPC.