Are we exempt from 401K early withdrawal penalty if my spouse quit job for a month because of day care closure?

Yes, these circumstances qualified you and your spouse to take a coronavirus-related distribution that is exempt from the early-distribution penalty.  You'll need to wait for the IRS to release Form 8915-E for reporting CRDs and for TurboTax to implement this form.

Thank you @dmertz for your reply.

Box 7 on both the Form 1099R has distribution code 1.

Is this correct?

Or we need to get it corrected to 2, which is early distribution exception applied?

https://www.irs.gov/pub/irs-drop/n-20-50.pdf

Section 3 Point A on page 11,  says

"If a payor is treating the payment as a coronavirus-related distribution and no other appropriate code applies, the payor is permitted to use distribution code 2 (early distribution, exception applies) in box 7 of Form 1099-R. However, a payor also is permitted to use distribution code 1 (early distribution, no known exception) in box 7 of Form 1099-R."

As indicated in Notice 2020-50, code 1 is not incorrect, so the payer will not change the code.  It's your responsibility to report the distribution as a CRD on Form 8915-E to eliminate the penalty.