US Close – Remember the Titans, NYC school fears, Debate Preview, Oil tanks on demand worries, Gold’s back

Today’s stock market weakness started with rising doubts that Democrats and Republicans have not moved the needle with stimulus talks, but the selloff accelerated on virus concerns.  No one is buying Pelosi’s optimism that new relief talks will lead to a deal.  In the middle of day fears quickly returned that New York City schools might be forced to shutdown sooner than anyone was planning, and that the coronavirus is about to cancel the first NFL game of the season.  New York City’s daily rate of positive tests is more than 3% for the first time in months.  If the positivity rate remains at 3% for seven days, all public schools will close.

The NFL was a bright spot for the reopening of the economy as the first three weeks of the season saw little COVID drama.  Today’s news that three Tennessee Titans players and 5 personnel members tested positive for COVID-19 raised fears that the season eventually could be in jeopardy since NFL teams travel from frequently and all over the country.

Debate

Tens of millions of Americans will watch the first Presidential debate between President Trump and Democratic nominee Joe Biden.  Trump is trailing in many of the battleground states so he will be extremely aggressive towards Biden.

Investors will pay close attention to see if Trump pushes Biden to maintain a hardline against China on trade, which might take away some moderate support.  Trump may try to further motivate his base and make Biden commit to the abolishment of the legislative filibuster, adding seats to the Supreme Court and granting statehood to Washington DC and Puerto Rico.

The abolishment of the filibuster would be disastrous for Wall Street because we would see radical changes over every major policy initiative.

Biden will likely focus on Trump’s handling of the coronavirus and the President’s taxes.  Biden earlier released his tax statement for 2019.

The debate will likely not move the needle for 90% of voters, but it could sway some of the undecided voters.

Oil

COVID is punishing oil prices again.  As coronavirus cases rise, economic activity seems destined for a bumpy road and that spells trouble for the crude demand outlook.  New York City test positivity rate tripled over the past few days to 3%, a key threshold that if steady for a week, could mean schools will shutdown.  If NYC is getting close to seeing restrictive measures before we have the winter wave of the virus, crude demand expectations will likely get severely downgraded in the coming weeks.

WTI crude’s decline should have been a lot worse considering the weaker dollar.  Demand worries will make it hard for WTI to break above the $40 level.  If the dollar rout returns, oil prices may only stabilize.

Gold

Gold surged on a weaker dollar, some hopes that Congress might come through with some fiscal stimulus, and some safe-haven flows as the virus worries grow.  Gold will completely resume its traditional role as a safe-haven if the dollar rebound has run its course.  We’ve been inundated with Fed speak and there is no doubt that rates are staying lower a lot longer than the other G10 central banks.  While no one doubts the economy needs more fiscal support, it still seems unlikely that Congress will get a deal done before the election.

Gold saw strong technical buying at the $1850 level and now that it is tentatively back above $1900, we could see momentum remain in place till $1950 if the dollar continues to weaken.