By Yasin Ebrahim
Investing.com – The Dow closed higher Tuesday as rallying oil prices on a surprise Saudi production cut sent energy stocks soaring, but upside was limited by uncertainty over the outcome of the Georgia election run-offs.
The Dow Jones Industrial Average rose 0.55%, or 167 points. The S&P 500 was up 0.71%, while the Nasdaq Composite added 0.95%.
Energy stocks supported the broader market as oil prices jumped above $50 for the first time since February after Saudi Arabia pledged to cut output by 1 million barrels a day from January levels to offset a rise in output from OPEC+, led by Russia and Kazakhstan.
The agreement allows Russia and Kazakhstan to lift production by 75,000 bpd in February from January levels and another 75,000 bpd in March.
Gains were kept in check as investors awaited results from the Georgian runoff elections that holds the key to control of the Senate. Voting closes at 7pm EST on Tuesday.
"Market sentiment toward potential outcomes is mixed, with a Democratic victory likely resulting in more fiscal stimulus in the short-term, but higher taxation and regulation in the long-term," D.A. Davidson said in a note.
Still, analysts are betting the rally will continue as the political ramifications from a potential Democratic sweep will likely fade over the long-term as earnings grow.
"In 2021, we forecast widespread COVID vaccinations, U.S. GDP growth of 5.9%, continued low interest rates, and above-consensus S&P 500 EPS of $175 that will be 6% higher than the pre-pandemic profits in 2019," Goldman Sachs (NYSE:GS) said.
Industrials, meanwhile, were led higher by a 4% rebound in Boeing (NYSE:BA) following a slump a day earlier as orders for the aircraft maker's much-maligned 737 Max resumed.
Boeing delivered a 737 Max jet to United Airlines Holdings (NASDAQ:UAL) on Dec. 8. United previously said it would bring the 737 MAX aircraft, which was grounded for nearly 20 months after two fatal crashes, back into schedule in February.
The overall sentiment on the aviation sector, however, appears timid on fears of further restrictions as the new coronavirus variant that sent the UK into lockdown has been detected across four different states so far.
In tech, chip stocks were in focus, up 2%, following a surge in Micron Technology (NASDAQ:MU) after Citi turned bullish on the company.
Citi upgraded its rating on Micron to buy from sell and price target on the stock to $100 from $35, citing favorable backdrop for memory demand and supply over the next year.
Qualcomm (NASDAQ:QCOM) rose almost 3% after the chipmaker said its president Cristiano Amon would replace Steve Mollenkopf as chief executive.
Alibaba (NYSE:BABA), meanwhile, jumped ended the day 5% higher after CNBC reported that billionaire founder Jack Ma was not missing, but rather taking time out of the spotlight amid an ongoing probe from Chinese regulators.
On the economic front, manufacturing activity rose to a more than two-year high, as the ongoing pandemic continues to have a limited impact on growth.