Stocks ended higher Tuesday as investors traded cautiously ahead of the two key Senate runoff elections in Georgia and as oil prices rose.
The elections in Georgia will determine whether the Democrats take control of Congress and enable them to push the legislative agenda of President-elect Joe Biden.
A swing to the Democrats could lead to greater fiscal stimulus and higher taxes. One or two Republican wins would give the GOP enough votes to block Biden from pursuing his more ambitious policies on trade, energy and security, according to analysts.
The Dow Jones Industrial Average finished up 167 points, or 0.55%, to 30,391 and the S&P 500 rose 0.71%. The Nasdaq was up 0.95%.
Also lifting stocks was a report that showed U.S. manufacturing expanded in December at the fastest pace in more than two years.
Stocks declined sharply on Monday as Wall Street's optimism over the rollout of coronavirus vaccines was dashed by a climb in infections and fears of tougher restrictions and lockdowns. The S&P 500 slumped 1.48% on Monday, the index's (worst drop to start a year since 2016.) - Get Report
"The first day doesn’t necessarily set the tone for the rest of the year, though," said Lindsey Bell, chief investment strategist for Ally Invest. "The S&P 500’s best year in recent history - 1995 - started with a small decline on the first day. It’s a 50/50 chance that the market will be up or down following a first-day decline.
"Judging this market by (Monday's) drop could be shortsighted, too. There are reasons to be optimistic about 2021. Covid vaccines are being distributed, earnings outlooks are improving, and the U.S. economy could be heading for a midyear boom. Fiscal and monetary support also remain supportive," Bell added.
Oil prices surged, with West Texas Intermediate crude rising nearly 5% to $50 a barrel, after OPEC+ reached an agreement to curb supply over the next two months, Bloomberg reported. Saudi Arabia will be making voluntary production cuts while most of the rest of the world's largest producers will be holding output steady.
China’s three largest telecommunications companies, meanwhile, surged Tuesday after the New York Stock Exchange reversed its decision to delist the shares.
China Mobile (CHL) - Get Report, China Telecom (CHA) - Get Report and China Unicom (CHU) - Get Report each jumped after the Big Board said in a statement late Monday that “it no longer intends to move forward with the delisting action." The NYSE cited "consultation with relevant regulatory authorities" for its reversal.
NYSE’s reversal was “quite unexpected,” Jackson Wong, director of asset management at Amber Hill Capital in Hong Kong, told Bloomberg.
“Some funds that had an obligation to unload these shares will now need to buy them back. Some investors are also starting to pricing in a scenario that the decision to halt delistings could be a start of a de-escalation in tensions between China and the U.S.”