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U.S. stocks traded higher in a choppy trading session Tuesday as investors focused on a pair of runoff elections in Georgia that will determine control of the Senate.
Investors are also monitoring the spread of COVID-19 as a more transmissible variant of the pathogen leads to stiffer lockdowns in parts of the world.
How are stock benchmarks performing?
- The Dow Jones Industrial Average DJIA, +0.47% was up 107.05 points, or 0.4%, at 30,330.94 after dipping into negative territory in morning trade.
- The S&P 500 SPX, +0.49% rose 13.58 points, or 0.4%, to 3,714.23.
- The Nasdaq Composite COMP, +0.54% gained 53.57 points, or 0.4%, to trade at 12,752.02.
On Monday, stocks fell to start trade in 2021, with the Dow and S&P 500 and the Nasdaq Composite falling more than 1%. The Dow and S&P saw their sharpest daily drops in almost 10 weeks.
See: How does the stock market perform after a 1% drop — or worse — to start a year?
What’s driving the market?
In Georgia, Democratic challengers Jon Ossoff and Raphael Warnock are facing off against Republican Sens. David Perdue and Kelly Loeffler, and the results may not be known for several days.
Betting markets and polls were signaling some confidence in the Democratic Party’s prospects, which could result in some repeal of corporate tax reductions and other measures that could weigh on stocks, market strategists said. However, a Democratic win would also boost prospects for another large round of economic aid that could boost the economy.
“If the Democrats win both runoff elections in Georgia this would open the door to a large fiscal stimulus package and more expansive fiscal policy in the coming years. Part of this will likely be financed by higher taxes somewhere down the road,” said Philip Marey, senior U.S. strategist at Rabobank, in a note.
Read: Biden says Democratic wins in Georgia’s runoffs will lead to $2,000 stimulus checks
If Republicans win at least one of the seats, Senate Republicans will likely block further fiscal stimulus and crimp any Democratic plans for expansive spending after President-elect Joe Biden takes office, Marey said.
“Consequently, there will be more pressure on the Fed to provide monetary stimulus during the course of 2021 if the economic recovery falters,” he wrote.
Republicans currently have a 51-48 majority in the Senate. If Democrats win both Georgia races, the party will gain control because Vice President-elect Kamala Harris would cast tiebreaking votes. If Republicans win one of them, the GOP will maintain its majority.
“As we stated yesterday, the chances of the Democrat’s taking control of the Senate in a tied majority scenario have risen,” wrote Peter Cardillo, chief market strategist at Spartan Capital Securities. “However, while we expect the GOP to maintain control by slim margin the political uncertainties will likely keep the market defensive,” he wrote.
That vote comes as the U.S. counted at least 196,386 new COVID-19 cases on Monday, and at least 2,047 people died, according to a New York Times tracker. Meanwhile, A highly contagious strain of COVID-19 recently discovered in the U.K. has also been found in New York, the state’s governor said Monday, a day after London announced a new, stricter lockdown in the country.
Meanwhile, in a separate development that might have implications for China-U. S. relations, the New York Stock Exchange reversed its decision to delist a trio of Chinese stocks: China Mobile Ltd., China Telecom Corp. and China Unicom Ltd. The NYSE’s delisting plans, which had been set to take effect next week, followed an order that had been signed by President Donald Trump in November.
In U.S. economic data, the Institute for Supply Management said its manufacturing index rose to 60.7% in December from to 57.5% in the prior month, marking the highest level in almost 2½ years. Economists surveyed by MarketWatch had forecast the index to total 57%. Readings over 50% indicate growth.
Cleveland Federal Reserve President Loretta Mester told reporters Tuesday that the central bank could continue its $120 billion per-month asset purchases through all of 2021 even if the economy improves in the second half of the year.
Which companies are in focus?
- Qualcomm Inc. QCOM, +2.07% shares rose more than 2% after the company announced Tuesday morning that its chief executive, Steve Mollenkopf, will be stepping down from his post on June 30 after more than a quarter-century at the helm. He’ll be replaced as CEO by Cristiano Amon, the company’s current president.
- Shares of Netflix Inc. NFLX, -0.67% were down 0.9% near $518.37. Benchmark analyst Matthew Harrigan reiterated his sell rating and $412 stock price target, saying he doesn’t expect any upside surprises for member growth in the fourth quarter or 2021.
What are other markets doing?
- The yield on the 10-year Treasury note TMUBMUSD10Y, 0.961% rose 4.4 basis points to 0.958%. Yields and debt prices move in opposite directions.
- The ICE U.S. Dollar Index DXY, -0.44%, a measure of the U.S. currency against a basket of six major rivals, fell 0.4%.
- Oil futures jumped, with the U.S. benchmark CL.1, +4.58% up 4.4% at $49.71 a barrel after pushing above $50 for the first time since February on reports OPEC+ reached a deal that would hold off on additional easing of output curbs through February. Gold futures GC00, +0.30% edged higher, up 0.4% near $1,954.70 an ounce.
- The pan-European Stoxx 600 Europe index SXXP, -0.19% fell 0.2%, while London’s FTSE 100 UKX, +0.61% was up 0.6%.
- In Asia, Hong Kong’s Hang Seng Index HSI, +0.64% rose 0.6%, while the Shanghai Composite SHCOMP, +0.73% rose 0.7% and Japan’s Nikkei 225 NIK, -0.37% fell 0.7%.
