U.S. Stocks Close Higher as Markets Await Georgia Election Results

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A Democratic win in the Georgia Senate runoff elections today would have important implications for markets.

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U.S. stocks wavered then rebounded to close higher on Tuesday, after a sharp selloff to start the year on Monday. All eyes are on Georgia, where voters head to the polls to decide which party will control the Senate for the next two years. Across the Atlantic, rising Covid-19 cases in Europe and more lockdown measures in the U.K. and Germany weighed on markets.

The Dow Jones Industrial Average closed up 168 points, or 0.6%, on Tuesday. The S&P 500 rose 0.7% and the Nasdaq Composite gained almost 1%. It was a broad rally: nine of the S&P 500’s 11 sectors closed in the green.

Indexes opened strong, then briefly dipped into the red on Tuesday morning. They turned higher again after data showed a continued strong rebound in the U.S.’s industrial and manufacturing economy. The Institute for Supply Management’s manufacturing purchasing managers index for December came in at 60.7, beating the 56.5 consensus estimate and the highest level since August 2018. It’s also the sixth straight month of a manufacturing PMI above the expansionary level of 50.

“It is not shocking that the ISM figures would attain such heights in 2020, as the economic rebound after the lockdowns in the spring was unprecedented,” wrote Amherst Pierpont Securities chief economist Stephen Stanley. “However, it is stunning that the December figure was the highest of the year, exceeding the initial bounceback in the spring and summer and surging in the face of the intensifying virus spread.”

Futures tied to the price of a barrel of West Texas Intermediate crude oil settled at $49.93 on Tuesday, up 4.9% to their highest level since February. The rise came after the oil cartel OPEC reached an agreement with Russia and other large producers to keep production steady until March. Saudi Arabia will also cut supply.

The pan-European Stoxx 600 index lost 0.2% on Tuesday. In London, the FTSE 100 closed up 0.6%, while Paris’ CAC 40 and Frankfurt’s DAX fell 0.4% and 0.6%, respectively. In Asia, Tokyo’s Nikkei 225 slipped 0.4%, while Hong Kong’s Hang Seng ticked up 0.6%. The Shanghai Composite Index rose 0.7%.

Markets anxiously await the results of the Senate runoff election in Georgia, but a close race means it may take several days to reach a final tally. From previously favoring both Republican incumbents, odds have swung to practically even as the election approached and early voting ballots came in.

The results will bring clarity on the control of the upper house of Congress. If Democrats win both seats, they will gain control of the Senate, making it easier for President-elect Joe Biden to push his agenda through Congress.

“That agenda includes corporate tax hikes that, by our estimation, could reduce S&P 500 after-tax earnings by 5%. Yet it also has fiscal stimulus measures that should support growth,” UBS strategist Mark Haefele wrote. “Markets appear to be getting more nervous about this possibility, and may also be worried that in the case of a close election, it could take several days for the winner to be known.”

The New York Stock Exchange reversed its move to delist three Chinese telecom giants, suddenly backtracking on its decision last week to remove China Unicom (ticker: CHU), China Mobile (CHL), and China Telecom (CHA) from its exchange.

Delisting the companies would have followed the executive order from President Donald Trump, effective Jan. 11, that prohibits trading in securities linked to the Chinese military. The NYSE said in a statement that its decision came “in light of further consultation with relevant regulatory authorities.”

Shares in the three telecom companies rocketed higher in U.S. trading, with China Unicom closing up 11.8%, China Mobile up 9.2%, and China Telecom up 8.8%.

Read more:NYSE Scraps Plan to Delist China Telecom Firms

In Europe, increased measures to contain the spread of coronavirus in major economies weighed on local markets.

U.K. Prime Minister Boris Johnson announced a third national lockdown in England on Monday evening, ordering people to stay home and closing all primary and secondary schools until at least mid February. Germany is set to extend its national lockdown, in place since Dec. 16, to the end of January.

The U.K. Chancellor of the Exchequer unveiled a £4.6 billion ($6.25 billion) package of new business grants on Tuesday morning to support companies through the new lockdown.

See:England Goes Under National Lockdown

Micron Technology (MU) gained 4.3% after getting upgraded to Buy from Sell at Citigroup ahead of its earnings on Thursday.

QuantumScape (QS) stock rose 18.9% after dropping 41% on Monday.

Snowflake (SNOW) stock jumped 1.7%. That’s despite Deutsche Bank cutting its price target to $270 from $335 ahead of the expiration of the software company’s second lockup, which could see a surge of shares coming to market.

Freeport-McMoRan (FCX) rose 4.5%. Argus upgraded the mining stock to Buy from Hold.

JD.com (JD) gained 10.6% after getting upgraded to Buy from Hold at Stifel.

First Solar (FSLR) dropped 9% after getting cut to Sell from Buy at Goldman Sachs.

Tesla (TSLA) rose 0.7% despite getting cut to Underperform from Neutral at Exane BNP Paribas.

Write to Nicholas Jasinski at nicholas.jasinski@barrons.com and Ben Levisohn at Ben.Levisohn@barrons.com