Geographical Covid-19 Uncertainty and the Market Impact of Initial Jobless Claims News

We investigate whether COVID-19 uncertainty affects the stock market’s reaction to macroeconomic news. We construct a daily measure of fundamental health uncertainty as the dispersion in the change in new cases across all 50 U.S. states. While the weekly release of initial jobless claims has no direct impact on the S&P 500 Index before the pandemic, we show that the marginal effect of health uncertainty is strongly negative during the pandemic. As health uncertainty increases, the release of higher than expected initial jobless claims has an increasingly negative impact on announcement-day market returns.