Stock Market Today 10/2/20: Dow Holds Up Better Than Expected but Tech Stocks Get Creamed

Stocks for the most part held up better than expected after a one-two punch of bad news threatened to end the trading week with a thud.

The early Friday morning announcement that President Donald Trump tested positive for coronavirus slammed equity futures ahead of the opening bell. And then the premarket release of the September jobs report, which showed a steep deceleration in the pace of recovery, did traders no favors either.

But an announcement by House of Representatives Speaker Nancy Pelosi that she anticipates striking a bipartisan economic relief deal with the Trump administration went a long way toward buoying the market's spirits. An "imminent" deal to provide another $25 billion in aid to the airline industry also bolstered sentiment.

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At Friday's close, the blue-chip Dow Jones Industrial Average slipped less than 0.5% to finish at 27,682. The broader S&P 500 declined almost 1% to 3,348. Only the Nasdaq Composite had a rough time of it, as some of the market's hottest stocks this year -- Apple (AAPL (opens in new tab)), Amazon.com (AMZN (opens in new tab)) and Microsoft (MSFT), to name just three -- became sources of cash. The tech-heavy index tumbled 2.2% to close at 11,075.

Other action in the market today:

• The S&P 500 lost 1% to close at 3,348.
• The small-cap Russell 2000 gained 0.5% to end at 1,539.
• Gold slipped 0.5% to $1,907 an ounce.
• The 10-year Treasury note finished at 0.696%.

The market mostly dodged what was shaping up to be a day of wicked volatility, but it seems certain that the reprieve won't last long.

It's an old adage that the market hates uncertainty, and now we're swimming in it. The president's positive COVID-19 test, just a month before the election, would have been sufficient to spook investors as we enter the final quarter of the year. The continued wrangling in D.C. over further stimulus and signs that the economy is losing steam only add to the anxiety.

Fortunately there are a number of strategies that investors can deploy to take the edge off heightened volatility. One idea is to allocate more of your portfolio to diversified bond funds (opens in new tab). And speaking of funds, don't sleep on diversified, high-quality (but low-fee) mutual funds run by seasoned stock pickers (opens in new tab) who have skin in the game. You could also shift more capital into market sectors that hold up better when volatility is running high. Sector funds are an easy way to gain exposure to defensive parts of the market (opens in new tab), and they're diversified too.

Lastly, for tactical investors who like to pick their own stocks, now might be a good time to take a closer look at low-volatility stocks (opens in new tab). These names can help stabilize a portfolio when the market is having a rough ride.