Mid-Market Update: S&P 500 eyes record on data and vaccine news, Oil rallies, Gold and dollar sink

A trifecta of positive news is helping the S&P 500 march closer to record high territory.  US stocks, except for mega-cap tech are rising after Russia approved the world’s first COVID-19 vaccine, President Trump is seriously contemplating a capital gains tax cut, and after a better than expected German survey and US economic data.  The rotation out of tech continues, but for record highs to be sustained, US-China relations need to see a major de-escalation.  If the world’s two largest economies continue to deliver tit-for-tat punitive measures, big tech could ultimately drag global equities.  The optimism on the vaccine front, quickly faded after investors realized that Russia’s approval came as Phase 3 trials have just begun. 

Oil

Oil prices are rising as the crude demand outlook improves following better than expected economic data, signs the US is turning the corner on the coronavirus, and as air travel continues to bounce back.  Germany’s recovery expectations jumped to the highest level since 2004 and that could spell good news for the overall outlook for Europe.   In the US, prices paid to producers edged higher in, positive news that economy continues to improve.  American hospitalizations for the coronavirus declined to the lowest level since early July and as US COVID-19 deaths drop for the first time in four weeks.  Yesterday’s air travel news that over 800,000 people flew on Sunday, which is the highest level in March 17th, provides optimism that Americans are itching to travel.  Air travel demand has a long way to go, down about 70% from a year ago, but a steady climb despite last month’s virus spread is a welcoming sign for crude demand. 

WTI crude is once again at the top of its range, but it seems the rally will stall until strong phase 3 results show a vaccine is here.  The Russian approval of a virus vaccine was met with much scrutiny as they have yet to complete clinical trials. 

Gold

Traders who were looking for an excuse to lock-in profits with their bullish gold bets jumped all over the Russia’s vaccine news.  It didn’t matter that this was somewhat telegraphed or that the Russians have only begun the Phase 3 trials.  Gold was ready for a selloff as US stocks climb toward record highs and on some optimism brewing that a major de-escalation could occur on Saturday when Senior US and Chinese officials review the implementation of the phase-one trade deal. 

Nothing really has changed for the medium- to long-term bullish outlook for gold.  Gold will continue to benefit from the stimulus trade, dollar weakness still has a long way to go, and the potential to see inflation signs emerge.  Investors will buy every major dip, but in the short-term, gold could trade through the $2000 level multiple times. 

FX

The dollar tanked after both a better-than-expected German survey and after President Trump said he is ‘seriously’ considering a capital gains tax cut. 

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