Markets Recover Some Losses, While Eyeing Georgia

Stocks gained on Tuesday, Jan. 5 after the major indices all sold off to start the year on Monday, Jan. 4.

News Recap

  • The Dow Jones closed 167.71 points higher, or 0.6%, at 30,391.60. The S&P 500 advanced 0.7% and the Nasdaq climbed nearly 1%
  • The Georgia Senate run-off elections on Jan. 5 were the main focus of investors. At the time of publication, Democrat candidate Raphael Warnock was declared the winner over the incumbent Republican Kelly Loeffler for the first Senate seat up for grabs. The other contested seat between Democrat Jon Ossoff and incumbent Republican David Perdue had yet to be called.
  • The balance of power in the Senate depends on these results, and markets could be volatile. Many believe that if the Democrats sweep the Georgia seats and win control, then higher taxes and progressive policies could hurt the market. On the other hand, others believe that a Democrat sweep could bring on larger and quicker stimulus relief.
  • Better-than-expected ISM U.S. manufacturing data came in and helped stocks higher. According to the ISM, manufacturing rose to 60.7 in December from 57.5 in November. The consensus was that the index would slightly decline to 57.
  • Energy stocks led the S&P higher and soared by 4.5% after Saudi Arabia agreed to voluntary production cuts in February and March. Oil giants such as Chevron (CVX) rose 2.7% as a result.
  • Oil futures surged by 4.9% and briefly broke past $50 a barrel for the first time since February.
  • Copper is a precious metal traditionally seen as a leading indicator for the global economy. On Jan. 5, it hit its highest level in nearly eight years and gained more than 2%.
  • Gold also reached an 8-week high due to more declines from the dollar.
  • Boeing (BA) was the best-performing Dow stock and gained 4.4%.
  • U.K. Prime Minister Boris Johnson on Jan. 4 announced a national lockdown to slow the spread of a new, more contagious coronavirus strain. Under these restrictions, people are only allowed to leave their homes for essentials, work (if they can’t from home), and exercise. Most schools, including universities, will also move to remote learning.
  • According to data compiled by Johns Hopkins University, more than 85 million COVID-19 cases have been confirmed globally, including 20.8 million in the U.S. and 2.7 million in the U.K.
  • Meanwhile, over 5 million people in the U.S. have now received a COVID-19 vaccination.

After stocks sharply dropped on Jan. 4 to kick off 2021, widespread gains on Jan. 5 offset some of these losses. While Monday was the first time since 2016 that the Dow Jones started a year off with declines, two major catalysts sent the major averages higher: the oil production agreement reached between OPEC and Russia, and better-than-expected manufacturing results from December.

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Disclaimer: All essays, research, and information found above represent analyses and opinions of Matthew Levy, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be ...

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