Never Mind the Georgia Runoff. The Stock Market Has Other Things on Its Mind.

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The stock market bounced back a bit from Monday’s drubbing as manufacturing data surprised to the upside on Tuesday.

The S&P 500 rose 0.7% to 3726.86, while the Nasdaq Composite gained 1% to 12,818.96, and the Dow Jones Industrial Average advanced 167.71 points, or 0.6%, to 30,391.60.

The Georgia runoff got all the attention Tuesday, because the results will determine whether the Senate is controlled by Republicans or Democrats. That was blamed, in part, for Monday’s drop, but didn’t seem to matter Tuesday. And maybe that’s because it really doesn’t matter for the stock market.

“We think that even in the event the Democrats sweep the Georgia elections, an element of gridlock will persist in D.C.,” writes RBC economist Tom Porcelli. “With a 50-50 Senate, it will still be difficult to get enough votes to pass any significant anti-growth tax policy.”

So maybe the runoff won’t be a market problem after all. And if that’s the case, we can pay more attention to things like how the Institute for Supply Management’s manufacturing survey rose to 60.7 in December, well above expectations for 56.8. Even better, the new-orders component, which is forward-looking, rose to 67.9, up from 65.01, a sign that activity could be picking up. Even the employment component rose back above 50, the level that signals growth, and could bode well for Friday’s jobs report. So much for that December slowdown?

Of course, the U.S. economy is far more dependent on services than manufacturing these days, so we’ll be looking for solid numbers out of the ISM services survey, which will be released on Thursday, for confirmation. And then there is the December payrolls number on Friday, one that some expect to turn negative.

For now, though, we’ll happily look at the bright side.

Write to Ben Levisohn at Ben.Levisohn@barrons.com