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By Nicholas
Jasinski | Tuesday, January 5 Georgia
on the Mind. U.S. stocks wavered
then rebounded to close higher today, after a sharp selloff to start the year
on Monday. All eyes are on the Peach State, where voters headed to the polls
to decide which party will control the Senate for the next two years. But a close race means it may take several
days to reach a final tally. The major
indexes opened strong, then briefly dipped into the red this 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 at the highest level since August 2018. It’s
also the sixth straight month of a manufacturing PMI above the expansionary
level of 50. Here's Amherst
Pierpont Securities chief economist Stephen
Stanley on that topic today: 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.
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. U.S.
manufacturers are seeing strong demand for industrial goods like machinery
and equipment. On aggregate, their order books are growing and supply is
tight. But the other side of the coin is that prices of components
and raw materials like metals, lumber, and chemicals are also on the rise. And there
are still some supply-chain issues and labor shortages. Many factories have
had to retool their processes and layouts to operate during the
pandemic, and workers who still get sick have to miss work. But overall,
the industrial economy continues to recover strongly. More on the
stock-market implications below. Oil had a
particularly strong day today, with the price of West Texas Intermediate
crude oil rising 4.9% to settle at $49.93, the highest since February.
The rise came after the Organization
of the Petroleum Exporting Countries (OPEC) reached an agreement with Russia and other
large producers to keep production steady until March. Saudi Arabia will also
cut supply. The Dow
Jones Industrial Average closed up 0.6%, the S&P
500 rose
0.7%, and the Nasdaq Composite gained almost 1%. Energy stocks were the top
performers today, with the S&P 500 sector adding 4.5%. But it was a broad
rally: nine of the index’s 11 sectors closed in the green, and REITs—today's
biggest losers—fell just 0.1%. |
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DJIA: +0.55% to 30,391.60 The Hot
Stock: Occidental
Petroleum +10.1% Best Sector:
Energy +4.5% |
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