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‘Get Ready’ (Red Alert Freeze)

“People should get ready,” Bill de Blasio said Friday.

He was referring to the distinct possibility that New York City will halt in-person learning as early as next week. The city’s seven-day average coronavirus positivity rate is on the brink of breaching 3%, the level beyond which de Blasio has said schools will close.

Updates will be delivered on Saturday and Sunday. Officials are prepared to close the doors at a moment’s notice. “Parents should have a plan for the rest of the month of November, that’s a safe way to think about it,” de Blasio added. “Have an alternative plan for beginning as early as Monday for whatever will help them get through this month if school is not open.”

Although transmission rates in city schools are extremely low, the Mayor fully intends to stick with a long-standing promise to close the doors if the 3% threshold is exceeded. “The move — which is now regarded by some City Hall officials as a question of when, not if — would be perhaps the most significant setback yet for the city’s recovery since the bleak days of spring, when it was a global center of the pandemic and all the schools were shuttered,” The New York Times wrote, in a good piece published Thursday that’s well worth a quick read.

De Blasio’s warning came a day after Chicago issued a stay-at-home advisory and amid a nationwide surge in cases that threatens to force local officials back into modified lockdowns in order to avoid straining the healthcare system.

Seven-day average cases are up more than 70% in New York state. Nationally, America is losing an average of more than 1,050 people per day to the virus. That number will probably increase materially in the weeks ahead, models show.

As Bloomberg wrote Friday, “today’s rising death tolls are still in large part driven by the Midwest and some hot spots that were starting to get bad in September and early October.” If you strip those out, the trend is stable, but the read-through is that fatalities will likely rise going forward given that surging infections are, by definition, a leading indicator, unless the mortality rate falls. The surge in the Midwest is off the charts on a cases per million basis.

This is all quite ominous, and while it highlights the necessity of getting a vaccine approved and distributed as quickly as possible, it also underscores the notion that it’s too late to avert the winter surge that so many experts warned was all but inevitable.

For markets, the incessant stream of overtly dour virus headlines played out against a cacophony of analysis around the implications of Pfizer’s upbeat vaccine data and expectations for similarly positive results from Moderna, due any day. The result was a see-saw week that found stocks careening between gains and losses. By Friday afternoon, US equities posted a solid weekly gain, closing at record highs despite Thursday’s swoon.

For Treasurys, you’d scarcely know how interesting things were during a holiday-split week for the bond market if all you looked at was a weekly chart.

Monday’s dramatic selloff was offset by Thursday’s rally, while Friday was muted. Ultimately, 10s are parked not too far from where they were a week ago. 1% suddenly seems elusive again. “The new bearish target for the benchmark is the yield peak at 97.3 bp set in the wake of the election that would need to be overcome before the psychological weight of a handle change,” BMO’s US rates team said Friday afternoon. “Past 1% is an unfilled opening gap from 1.114% to 1.140% that has been unchallenged since March,” they added.

Despite virus worries and a rough Friday session, oil managed to post a ~8.5% gain on the week. OPEC+ is in play and, obviously, a vaccine would be a huge boost for the market and especially for beaten down energy shares.

Speaking of energy laggards, this was the best week for the energy ETF in more than a decade.

That’ll be small comfort to energy bulls in what’s been a truly catastrophic year, but it’s an example of what can happen when the tide suddenly turns and the “last become first,” so to speak.

Stimulus in the lame duck session looks dead in the water. Reports suggest the White House has left things to Mitch McConnell, and that means the chances of a compromise deal that comes anywhere near Democrats’ $2 trillion demand are zero. (I hope I’m wrong about that — I really, really do.)

Nancy Pelosi on Friday “urged” the GOP to “acknowledge the crisis and come to the table.” She called the situation “a red alert.”

On Friday afternoon, just before the closing bell on Wall Street, Oregon announced a two-week “freeze” in an effort to stop the spread of the virus.


 

5 comments on “‘Get Ready’ (Red Alert Freeze)

  1. runamok says:

    I fail to comprehend the palpable abandonment of our nation by our elites and our government. Even Justice Alito, in a speech that leaves little doubt that the court is comprised of at least one partisan, when it’s not supposed to be comprised of any, seems to have been infected with utter disdain for our country. Many of our elites exhibit behavior that some could characterize as harsh and spiteful. What did we ever do to them? We are going to need new elites at some point.

    We had ample warning regarding this winter’s (and, it’s only November!) surge yet failed to act. I chalk this one up to both incompetence and the psyops so many of our citizenry seem to have fallen under the spell of.

    Will be interesting to see how much of an impact the Moderna news is responsible for. Of course, if it’s positive, it might hopefully offset other, miserable news, on the day the press release comes out. Regardless, barring an accident, we should probably see nothing worse than an air pocket going into the end of the year (who knows).

    I don’t understand the calculation in the $VIX and the use of puts and calls that go into it. Regardless, when looking at the charts, seems like $VIX should be lower than the current level.

  2. Canuck says:

    $VIX should be lower?? Look at a stock like Enbridge. Even though they had very good news and very bad news in the same day, their options traded below recent realized volatility. Look, I get it. I try to do the “double dip” myself (sell the covered call option and try to collect the dividend). But at what point does it become stupid to sell cheap volatility on a volatile underlying? Same applies to the general market.

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