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U.S. Stocks Close Mixed As Traders React To Georgia Runoffs, Riot At The Capitol

wallstreet aug22 06jan21 lt

The Dow moved sharply higher during trading on Wednesday and ended the session at a new record closing high, while the tech-heavy Nasdaq saw considerable volatility over the course of the trading day before closing firmly in the red.

While the Nasdaq slid 78.17 points or 0.6 percent to 12,740.79, the Dow jumped 437.80 points or 1.4 percent to 30,829.40 and the S&P 500 climbed 21.28 points or 0.6 percent to 3,748.14.

The mixed performance on Wall Street came as traders reacted to the results of the highly anticipated Georgia runoff elections on Tuesday.

Democratic candidate Rev. Raphael Warnock is projected to win his race against Republican Senator Kelly Loeffler, while the race between Jon Ossoff and GOP Senator David Perdue is too close to call but the Democrat is in the lead.

If Ossoff holds onto his narrow lead, the Senate would be split 50-50, with a tie-breaking vote by Vice President-elect Kamala Harris giving Democrats control of the chamber.

The jump by the Dow came as Democratic control of the House, Senate and White House is seen as a positive for cyclical stocks due to the likelihood of additional fiscal stimulus.

Meanwhile, the Nasdaq closed lower, as tech stocks could be hurt by the shift into cyclical stocks as well as the higher taxes sought by many Democrats.

Stocks moved to the downside going into the close of trading as supporters of President Donald Trump stormed the U.S. capitol building as lawmakers began the process of certifying President-elect Joe Biden's victory.

Meanwhile, traders largely shrugged off a report from payroll processor ADP showing an unexpected drop in private sector employment in the U.S. in the month of December.

ADP said private sector employment fell by 123,000 jobs in December after jumping by a downwardly revised 304,000 jobs in November.

The decrease surprised economists, who had expected employment to climb by about 88,000 jobs compared to the addition of 307,000 jobs originally reported for the previous month.

"As the impact of the pandemic on the labor market intensifies, December posted the first decline since April 2020," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. "The job losses were primarily concentrated in retail and leisure and hospitality."

On Friday, the Labor Department is scheduled to release its more closely watched monthly employment report, which includes both public and private sector jobs.

Economists currently expect employment to increase by 100,000 jobs in December after climbing by 245,000 jobs in November. The unemployment rate is expected to remain at 6.7 percent.

Sector News

Banking stocks turned in some of the market's best performances on the day, driving the KBW Bank Index up by 6.8 percent to its best closing level in over ten months.

Substantial strength was also visible among steel stocks, as reflected by the 5.1 percent spike by the NYSE Arca Steel Index. The index ended the session at a nearly three-year closing high.

Energy stocks also showed a significant move to the upside on the day, extending the rally seen in the previous session.

The continued strength among energy stocks came as the price of crude oil saw further upside after spiking by more than $2 a barrel on Tuesday, with crude for February delivery climbing $0.70 to $50.63 a barrel.

Tobacco, brokerage, and chemical stocks also saw considerable strength on the day, while software stocks fell sharply, dragging the Dow Jones U.S. Software Index down by 2.5 percent.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance on Wednesday. Japan's Nikkei 225 Index fell by 0.4 percent, while China's Shanghai Composite Index advanced by 0.6 percent.

Meanwhile, the major European markets all showed strong moves to the upside on the day. While the U.K.'s FTSE 100 Index spiked by 3.5 percent, the German DAX Index surged up by 1.8 percent and the French CAC 40 Index jumped by 1.2 percent.

In the bond market, treasuries moved significantly lower in reaction to the results of the Georgia runoffs. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 8.7 basis points to 1.042 percent, closing above 1 percent for the first time since March.

Looking Ahead

Further violence at the U.S. capitol building could impact trading on Thursday along with reports on weekly jobless claims, the U.S. trade deficit and service sector activity.

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