Stocks rose on Tuesday, recovering some of their sharp losses from the previous session, as traders made bets for a strong global economic recovery.
The Dow Jones Industrial Average closed 167.71 points higher, or 0.6%, at 30,391.60. The S&P 500 advanced 0.7% to 3,726.86, and the Nasdaq Composite climbed nearly 1% to 12,818.96.
Boeing was the best-performing stock in the Dow, gaining 4.4%. Energy stocks advanced 4.5% — their biggest one-day jump since Dec. 4 — after Saudi Arabia agreed to voluntary production cuts in February and March. Chevron rose 2.7%. The news also sent U.S. oil futures up 4.9% to briefly break above $50 per barrel for the first time since February.
Sentiment also got a boost from stronger-than-expected U.S. manufacturing data. The Institute for Supply Management said its manufacturing index rose to 60.7 in December — its highest level since August 2018 — from 57.5 in November. Economists polled by Dow Jones expected the index to come in at 57.
"This strength should continue this year until the service sector starts to resurge and consumers shift their spending again," said Peter Boockvar, chief investment officer at Bleakley Advisory Group. "At the same time, supply constraints will continue, inflation pressures will only grow."
Copper — traditionally seen as a leading indicator for the global economy — popped more than 2% and hit its highest level in nearly eight years.
Tuesday's moves came after a steep decline for stocks on Monday, the first trading day of 2021. The three major averages all fell more than 1% in the previous session.
Investors also looked ahead to two key elections in Georgia, which will determine whether Republicans can hold on to control in the Senate. Many fear that increased tax rates and more progressive policies could weigh on the market if Democrats gain control of the Senate.
However, such an outcome could create an opportunity for a bigger and faster spending package.
"Today's Georgia Senate runoff could have substantial implications for the markets if both Democrat candidates win," wrote Tom Essaye, founder of The Sevens Report. "We don't view a Democrat Senate as a bearish game changer in the short term because there would still be a lot of positives in this market. But it would be a new and unaccounted for initial head-wind on stocks."
Meanwhile, rising Covid-19 cases globally and new lockdown restrictions continued to keep investors on edge. More than 85 million Covid-19 cases have been confirmed globally, including 20.8 million in the U.S., according to data from Johns Hopkins University.
On Monday, England imposed a third coronavirus lockdown as the region grapples with a more transmissible variant of Covid-19. New York state has confirmed its first case of the new strain, Gov. Andrew Cuomo said Monday.
"Investors are feeling antsy this week," Lindsey Bell, chief investment strategist at Ally Invest, said in an email. "COVID cases continue to spike, with a new variant of the virus spreading across the globe...runoff races in Georgia could decide the makeup of the Senate, and the market generally has performed better in a split Congress."
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