U.S. stocks closed lower on Friday as news that U.S. President Donald Trump tested positive for COVID-19 put investors in a risk-off mood and added to mounting uncertainties surrounding the looming election.

Tech shares weighed heaviest on the indexes, but the blue-chip Dow's losses were mitigated by gains in economically sensitive cyclical stocks.

Despite Friday's sell-off, the S&P and the Nasdaq both gained 1.5% on the week, while the Dow ended the session 1.9% higher than last Friday's close.

Trump tweeted late Thursday that he had contracted the coronavirus and would be placed under quarantine, compounding the unknowns for an already volatile market.

But stocks pared losses after the White House provided assurances that Trump, while experiencing mild symptoms, is not incapacitated.

"This injects further uncertainty into the outcome of the election," said Roberto Perli, head of global policy research at Cornerstone Macro in Washington. "My read is that markets have demonstrated an aversion of late especially to uncertainty, not so much to one or the other candidate winning."

Equities also got a brief boost after U.S. House of Representatives Speaker Nancy Pelosi's announcement that an agreement to provide another $25 billion in government assistance to the airline industry was "imminent."

"Markets are also paying attention to the likelihood that another stimulus package will pass soon," Perli added. "If that happens it could offset at least in part the uncertainty generated by the COVID news."

House Democrats passed a $2.2 trillion fiscal aid package on Thursday, but the bill is unlikely to be approved in the Republican-controlled Senate.

Partisan wrangling over the size and details of a new round of stimulus have stalled, over two months after emergency unemployment benefits expired for millions of Americans.

Data released on Friday showed the recovery of the labor market could be losing steam. The U.S. economy added 661,000 jobs in September, fewer than expected and the slowest increase since the recovery began in May.

Payrolls remain a long way from regaining the 22 million jobs lost since the initial shutdown, and the ranks of the permanently unemployed are swelling.

The Dow Jones Industrial Average fell 134.09 points, or 0.48%, to 27,682.81, the S&P 500 lost 32.36 points, or 0.96%, to 3,348.44 and the Nasdaq Composite dropped 251.49 points, or 2.22%, to 11,075.02.

Of the 11 major sectors in the S&P 500, tech suffered the biggest loss, while real estate and utilities enjoyed the largest percentage gains.

In a reversal from recent sessions, market leaders Apple Inc Amazon.com and Microsoft Corp were the heaviest drags on the S&P and the Nasdaq.

Commercial air carriers rose on news off a possible new round of government aid, with the S&P 1500 Airline index rising 2.3%.

Tesla Inc shares plunged 7.4% after the electric car maker's third quarter vehicle deliveries, while reaching a new record, underwhelmed investors.

Advancing issues outnumbered declining ones on the NYSE by a 1.45-to-1 ratio; on Nasdaq, a 1.13-to-1 ratio favored decliners.

The S&P 500 posted six new 52-week highs and one new low; the Nasdaq Composite recorded 56 new highs and 34 new lows.

Volume on U.S. exchanges was 9.30 billion shares, compared with the 9.93 billion average over the last 20 trading days. 

GLOBAL MARKETS

Global equity markets slumped and investors piled into gold and the Japanese yen after Trump tested positive for the coronavirus, adding to market uncertainty just 32 days before the U.S. election.

Trump's bombshell announcement spurred risk-off moves among investors already concerned about an elusive coronavirus relief package aimed at bolstering a U.S. economy that has lost steam, as seen by slowing jobs growth in the September payrolls data.

Gold posted its best week in eight even after paring gains, while the yen advanced sharply before also retreating a bit. Yields on the 10-year U.S. Treasury note rose slightly, stuck in a narrow trading range it has held for three weeks.

How Americans feel about the pandemic when they vote on Nov. 3 could determine the election's outcome, and that is highly unusual, said Michael Arone, chief investment strategist for the U.S. SPDR business at State Street Global Advisors in Boston.

"Today's news demonstrates a bit of a weakness in terms of the Trump re-election campaign," he said. "The range of outcomes has expanded and some of the more extreme outcomes have increased in probability, and markets certainly don't like that."

Trump is experiencing mild symptoms but will keep working after testing positive, administration officials said.

The main U.S. stock indexes fell but regional ones in Europe ended slightly higher after an initial sell-off on the Trump news. The FTSEurofirst 300 index rose 0.22% to 1,405.35 and the STOXX Europe 600 added 0.25% to 362.69.

MSCI's benchmark for global equity markets fell 0.69% to 564.07, while its emerging markets index fell 0.29%.

How long risk-aversion will last depends on the extent of the infection within the White House, said Francois Savary, chief investment officer at Swiss wealth manager Prime Partners.

"It will weigh on the market today and early next week but will not induce a long-lasting correction if the infection is contained to Trump," he said.

The Labor Department's closely watched employment report on Friday was the last before the presidential election.

September's employment gains were the smallest since the jobs recovery started in May and left the U.S. labor market a long way from recouping the 22.2 million jobs lost in March and April, indicating slower growth heading into the fourth quarter.

U.S. nonfarm payrolls increased by 661,000 jobs last month, below consensus expectations of 850,000, leading to mostly negative reaction by economists.

But both Arone and Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA in New York, said the loss of government jobs, mostly seasonal in education, pulled numbers lower while the private sector's gains were above overall expectations.

"The net result is the seasonal factors pulled down the state and local portion, very, very dramatically, in particular in the education area," Ricchiuto said. "The private sector component, however, continues to improve at a healthy pace."

The government lost more than 200,000 jobs, Arone said.

"Those job losses on the government side are real, don't get me wrong. But overall the private sector seems to be hanging in there pretty well," he said.

BETS ARE OFF

With more uncertainty about the election, online gambling site Betfair suspended betting on its outcome.

Trump said on Twitter late on Thursday that he and first lady Melania Trump were going into quarantine after an aide tested positive for the virus, triggering a rise in the dollar and the yen. The dollar index rose 0.128%, with the euro down 0.31% to $1.1711. A couple of hours later, Trump tweeted that he and his wife had tested positive.

The Japanese yen strengthened 0.15% versus the greenback at 105.37 per dollar.

The Australian dollar, which serves as a liquid proxy for risk assets, slipped 0.23%.

Germany's benchmark 10-year bond traded 0.2 basis points lower at -0.539%.

Crude prices fell 4% on Trump's positive test for COVID-19, roiling risky assets, and as rising global crude output threatens to overwhelm the oil market's weak recovery.

Brent crude futures settled down $1.66 at $39.27 a barrel. U.S. crude futures fell $1.67 to settle at $37.05 a barrel.

Gold pared early gains to turn lower as stocks pared losses.

"If more members of the U.S. government's senior leadership are diagnosed positive, gold could be set for an extended rally," said Jeffrey Halley, a senior market analyst at OANDA.

Spot gold prices fell 0.20% to $1,901.27 an ounce. U.S. gold futures settled down 0.5% at $1,907.60.