US Close – NYC Public Schools to Close, Pfizer, Boeing, FX/Treasuries, Oil, Gold, Bitcoin

Incremental positive vaccine news and the ending of Boeing’s 737 MAX 20-month grounding was overshadowed by short-term virus worries and lack of a restart of stimulus talks from Congress.  Much of Wall Street is anticipating stocks to finish the year slightly lower from current levels, so range trading could persist throughout the holidays.  The S&P 500 Index and Dow Jones Industrial Average turned negative while the cyclical rotation trade kept the Russell 2000 Index in positive and record territory.
A tense NYC Governor Cuomo press conference did little to provide optimism that NYC was returning back to lockdowns and seeing some school closures. Risk aversion prevailed after reports that NYC school systems will temporarily close tomorrow.
Pfizer
It turns out Pfizer’s COVID vaccine is also 95% effective in preventing infection, matching Moderna’s results, but still requiring deep freezing.  Wall Street is starting to show signs that it will be unfazed with incrementally positive vaccine news.  Investors are completely expecting the at-risk population to get their vaccinations early next year and the general public receiving access early in the summer.  The last major market moving vaccine news announcement might not happen until early next year when J&J announces the results of their single dose vaccine.
Boeing
Boeing’s 737 MAX crisis had repercussions that devastated its global supply chain and large parts of the US economy.  The FAA’s decision to clear the way for the 737 Max to return to service is very positive news for the plane manufacturer and all its partners.  With positive vaccine news raising the prospects of significantly improved air travel demand for the second half of next year, airlines could start considering replacing older planes again.  Boeing is a long way from having things return to normal, but today was a necessary step in the right direction.
FX/Treasuries
The yield curve is not steepening and that means many traders are expecting the Fed to adopt yield curve control next month and a boost to their monthly purchases.  Despite all the optimism that there is an end in sight to the COVID-19 pandemic, Treasury yields are slightly higher today, but still stubbornly low considering the outlook for late next year.
The dollar is weaker across the board as COVID vaccine optimism boosts the global economic outlook for next year.  Despite all the optimism that is brewing, the US labor market recovery will keep the Fed remaining ultra-accommodative throughout all of next year and that should keep the dollar vulnerable.
Oil
Crude prices rallied on continued COVID vaccine optimism and a bullish EIA crude oil inventory report.  Energy traders are upgrading their 2021 crude demand forecasts as hopes are high for COVID vaccines to be widely available before the summer travel season.  The short-term outlook is bleak as lockdowns will continue to become a recurring theme until the US gets the virus spread under control.  The supply side headlines also continue to support crude prices as energy markets firmly are pricing in OPEC+ to hold off any supply increases.
The EIA crude oil inventory report however eased some concerns that oversupply concerns were coming back.  The weekly stockpile data showed inventories rose 769,000 barrels, less than the consensus estimate of 1.24 million barrels, and significantly lower than yesterday’s API 4.2-million-barrel build.
WTI crude continues to respect the highs set in the summer and that will likely remain the case until new virus cases start to decline.  The rate of increase is slowing, but it seems the US is about to start having days with over 200,000 new cases.  If the regional lockdowns prove to be effective, hopefully the downshift in cases will occur in early December.
WTI crude gave up a majority of its gains after news that NYC schools will temporarily close. tomorrow
Gold
Gold’s been too ping pong between $1850 and $1900 levels.  Gold has survived the removal of the biggest risk event, light at the end of the COVID tunnel, but has yet to get any fresh stimulus signs from both the Fed and Congress.  It seems with each incremental vaccine development, a strong case could be made to unwind your safe-haven positions.  Today, Pfizer’s final COVID vaccine data found a 95% effective rate in preventing infection, showing it is more even more effective and matches Moderna’s results.  The second half of next year could see large parts of the economy return to pre-pandemic life but until we get there, a lot of support is still needed for the economy.
The US economy needs more stimulus and Congress is dragging their feet.  Gold’s tight range may stick until House Speaker Pelosi and Senate Majority Leader McConnell resume coronavirus stimulus talks.  It seems the Fed will do nothing until the December 16th policy decision and that will make it hard for macro traders to increase their bullish bets.
Gold should still see support from the announcements of lockdowns and school closures as that will likely be the catalyst to force Congress to resume stimulus talks.
Bitcoin
Bitcoin trading for the rest of the year will be a rollercoaster ride.  Extreme swings in either direction will happen as Bitcoin attempts to make an all-time high.  Hedge fund money is likely to drive volatility up and produce some $1000 moves out of nowhere.  Bitcoin’s should have some failed attempts at the $20,000 level, but it seems very possible that the rise to record terriory could happen before the holidays.

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