In just the last 24 hours, the wall of worry for stocks got a lot higher.
President Donald Trump has contracted Covid-19, which keeps him off the campaign trail and secluded in the White House for at least two weeks. The betting markets are raising the odds for his rival Joe Biden, whose policies are generally not viewed as good for the market as Trump's.
Then the September jobs report confirmed the pace of job creation was already slowing, even before a wave of public announcements this week by Disney and others that they are laying off thousands of workers. There were 661,000 jobs added in September, well below the 800,000 or more that were expected.
Yet, the stock market has come off its lows, and the Dow, down more than 400 points early in the day, was now just slightly lower in afternoon trading.
"I look at the way the tape is trading, and it's trying to price in more stimulus," said Julian Emanuel, head of equities and derivatives trading at BTIG.
There was no big change announced in the discussions between Democrats and Republicans on a stimulus package to help the economy.
But there seemed to be a breakthrough when House Speaker Nancy Pelosi Friday called on airlines to halt furloughs, promising some aid either as part of a bi-partisan stand alone bill or as part of a bigger negotiated relief bill.
Jim Paulsen, chief investment strategist at Leuthold Group, said he always believed there would be a stimulus package, but Pelosi's move to provide airline aid was a sign there could be further bi-partisan movement on a bigger package.
"The stock market seems like it was glued to that stimulus...It would swing back and forth on it," said Paulsen. "The stimulus package matters."
Pelosi said Trump's illness illustrates how serious the virus is and could change the tone of the negotiations. House Democrats approved a $2.2 trillion stimulus package this week, while Treasury Secretary Steven Mnuchin has offered $1.6 trillion.
"The biggest hurdle could be Senate Republicans. [Trump] understands his base. He knows what they want," said Tom Block, Fundstrat Washington policy analyst. The loss of Trump on the campaign trail could be a negative for Republicans in the election, but they may be more willing to come together on stimulus.
"I think it might marginally help it. I think the president wants this bill," said Block.
If adopted, the stimulus package is expected to provide another round of direct payments to Americans; enhanced unemployment benefits; aid for businesses and funds for state and local government. The September jobs report showed up some weakening in the labor market, and there was some market speculation that could help spur stimulus talks.
Permanent job losses in September rose by 345,000 to 3.8 million, an increase of 2.5 million since February. Public sector job losses were large, with 280,000 jobs lost in state and local education, as students in many areas stayed home. The stimulus was expected to provide specific aid for schools.
"This really crystalizes the need for additional aid now by Congress. This might change their views. Policy uncertainty is a tax on the economy," said Diane Swonk, chief economist at Grant Thornton.
Emanuel said the fact the president is now ill could hurt confidence and slow down some of the improvement in the economy.
"The underlying tone is, again, whether its directly or later, there's going to be stimulus," Emanuel said. "'Whether its this month or November, this reinforces the need for stimulus because the president falling ill signals to , at the margin, the person whose thinking about going out to dinner to think again. It's a significant economic and psychological hindrance."
But even with a potential stimulus bill, uncertainty about the election has increased.
"You're taking your best player off the field. He is a great campaigner. His supporters love seeing him," said Block. "He's off the field now for at least two weeks."
The big fear around the election has been that there will be no clear winner Nov. 3, leaving the market swinging wildly during weeks of uncertainty. Biden's lead edged up slightly after Tuesday's debate and is now an average 6.8% in major polls over Trump.
"It's been interesting over the past few days, as the polls seem to show that Biden's lead is stable or slightly up, and yet the market has had a positive bias," said Ed Keon, chief investment strategist at QMA. Keon made his comments on Thursday before the president's illness was known.
Biden gained less than a percentage point in the average of polls on RealClearPolitics following the debate but picked up several points in betting markets.
"I think what the market is telling us...is having a resolution is more important than who wins...that the negative policy response of higher tax rates for corporations and higher income individuals which would be negative for the stock market, would be offset by greater fiscal spending," said Keon. Biden has said he would raise the corporate tax rate and capital gains tax rate, both negatives for stocks.
But some investors have been latching onto the idea that Biden would likely push through a big infrastructure package, if there is a blue wave and it brings in a Democratic majority in the senate.
"A blue wave might be more growth positive than four more years of gridlock" said Jon Hill, fixed income strategist at BMO.
However, the deeper concern in the stock market is still the pandemic and fears of another wave of infections. In a CNBC poll, 61% of strategists and investors were more worried about a new wave of the virus. Just 12% said they were worried about election uncertainty. Twenty-seven percent were concerned about a slow economic recovery.
As for the election, 67% said a Trump victory would be better than a Biden victory for the stock market.
Paulsen expects the stock market to stay volatile but continue its uptrend. However that could change if there's more risk to the election.
"To me, it's not so much about who wins the election, it's just whether it's so close that Trump could drag it on for a long time," said Paulsen. Another risk would be if Trump is unable to serve as the GOP candidate, he said.