The Dow Jones industrial average shot up 465.83 points, or 1.7 percent, to close at 28,148,64. The S&P 500 gained 60.18 points, or 1.8 percent, to end at 3,408.60 while the Nasdaq composite climbed 257.47 points, or 2.3 percent, to 11,332,49.
"Signaled improvements in President Trump's health and increasing optimism around renewed stimulus talks are certainly driving the market rally today, and a widening lead of Biden in the polls is also helping to calm market jitters," said Nicole Tanenbaum of Chequers Financial Management. But, as she and other analysts noted, volatility will likely continue as investors assess the president's health, weigh the prospects of government stimulus and seek clarity about the Nov. 3 election.
September proved to be a tumultuous month of trading. Sentiment soured after a summer of explosive gains as economic data and high unemployment rates tempered recovery hopes. Analysts have cautioned that many of the stocks that catapulted the market to record-high levels rose too high and too fast, inviting a sell-off. And as the number of Americans who have died from covid-19 climbed past 200,000, the business community and the broader public were receiving mixed messaging from drugmakers and the Trump administration about the timeline for safe and viable vaccine.
But reignited stimulus talks have lifted investor confidence. On Friday, House Speaker Nancy Pelosi (D-Calif.) suggested that Trump's diagnosis could accelerate an agreement, which would potentially include government checks sent directly to households, funding for struggling cities and states, unemployment assistance and money for hard-pressed small businesses. Wavering economic data and large-scale corporate layoffs further underscore the pressure for Democrats and the White House to strike a deal, Tanenbaum said.
Kristina Hooper, chief global market strategist at Invesco, said she suspects Trump contracting covid-19 could lead to broader adoption of masks, as average Americans recognize that if the president of the United States can contract the virus, they can too. "More masks means less likelihood of the spread of COVID-19, which should be a significant positive for the economy," she said. "I also wouldn't disagree with House Speaker Pelosi in her assessment that the President's COVID-19 diagnosis could spur Senate Republicans into recognizing how virulent the disease is, which could in turn prompt them to agree to a larger stimulus package."
Still, the president's illness and the infection of several U.S. senators adds yet another element of uncertainty to prolonged negotiations that have stalled before, and to the federal government's broader response to the virus.
"While the backdrop is supportive for markets over the coming months, investors should brace themselves for near-term volatility given the uncertainty with upcoming U.S. elections and continued concerns around a delayed economic recovery should we see a second wave of the virus," said Frank Panayotou, managing director at UBS Private Wealth Management.
At least 209,000 people have died from coronavirus in the U.S., and nearly 7.4 million cases have been recorded.
On Friday the Labor Department disclosed the U.S. economy added 661,000 jobs in September, registering the smallest monthly job gains since May, a signal that the broader recovery is slowing. Experts have pointed to the lackluster jobs data as evidence that direct government intervention is necessary to avoid more long-term economic damage. The jobs report, which showed that the unemployment rate has dropped to 7.9 percent, will be the last monthly summary before the Nov. 3 election.
As news headlines change and more "October Surprises" emerge, sharp moves in the markets should be expected, said Michael Farr, president of wealth management firm Farr, Miller & Washington. He noted that this year has seen 42 days of significant market swings of two percent or larger. "Don't be surprised if we have more," he said.
European and Asian markets, which also are tracking Trump's health closely, ended in positive territory across the board.
Khoon Goh, head of Asia research at ANZ, said the initial "unknown unknowns" created a level of uncertainty "that previously no one really cared to think about," he said. "It prompts investors to sell first and ask questions later."
Stock markets slumped around the world on Friday, as Trump, 74, and a number of officials close to him tested positive for the virus. The news added uncertainty to the prospects of the U.S. economic recovery, and it called into question how much bandwidth the Trump administration would have to attend to other matters in coming weeks.
The markets appeared to take a measure of reassurance from images of Trump in a motorcade on Sunday, despite critics denouncing the photo opportunity for putting Secret Service officers at risk of infection.
In Asia, Hong Kong’s Hang Seng Index added 1.3 percent on Monday, after posting its biggest weekly decline in six months last week. The Nikkei in Japan closed 1.2 percent higher.
Aside from Trump’s health, other factors buoying Asia markets on Monday included upbeat economic data out of Taiwan and South Korea, and hopes that the U.S. fiscal stimulus package would be passed, Goh said.
Australia’s ASX200 closed 2.6 percent higher, its best session since June, on investor hopes of more stimulus, including tax cuts, to be revealed in this week’s national budget.
Mainland Chinese stock markets remained closed for the country’s extended national day holiday.
European equities also were in the green on Monday, with London’s FTSE 100 and the Euro Stoxx 50 both up about 0.6 percent ad 0.8 percent, respectively.