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U.S. Stock Futures Waver Ahead of Georgia Elections

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U.S. stock futures wobbled Tuesday as investors awaited the outcome of two electoral races in Georgia that will determine control of the Senate.

Futures tied to the S&P 500, the Dow Jones Industrial Average and the Nasdaq-100 wavered between gains and losses, pointing to choppy trading after the New York opening bell. The major benchmarks tumbled sharply on Monday, after closing at record levels just days earlier.

Money managers are closely monitoring the Georgia Senate runoff elections Tuesday. If Democrats win both seats, that could make it easier for President-elect Joe Biden’s administration to pass new legislation.

Additional fiscal stimulus would be more likely if Democrats control Congress and the White House, and that could potentially give stocks another leg up, investors have said. But the prospect of tax increases and more regulation is also weighing on markets, they cautioned.

“The market loves status quo, gridlock, and that is almost where we are at the moment,” said Patrick Spencer, managing director of U.S. investment firm Baird. “There is fear of regulations on big tech and there’s fear of more taxes, but with a slim majority, you’re not going to get a lot of that.”

Mr. Spencer isn’t alone in that view. A narrow victory for Democrats, or Republicans retaining control of the Senate, is likely to mean that the legislative agenda would be tempered, others also said.

“If the government is in gridlock, that is Goldilocks, because the government will have their hands tied,” said

Gregory Perdon,
co-chief investment officer at private bank
Arbuthnot Latham.

U.S. stocks are poised for muted gains after dropping sharply on Monday.

U.S. stocks are poised for muted gains after dropping sharply on Monday.

Photo: Michael Nagle/Bloomberg News

In the near term, investors also remain focused on the coronavirus pandemic, with elevated infection levels and the likelihood of restrictions on social and business activity potentially setting back the global economic recovery. A highly contagious strain of Covid-19 recently discovered in the U.K. has also been found in New York, the state’s governor said Monday.

“On a daily basis, we’re going to have this tug and pull between hospitalization rates and mobility,” said Mr. Perdon.

Four candidates head into a runoff election, in a bid to win a pair of seats that will determine which party controls the U.S. Senate. WSJ’s Cameron McWhirter explains the stakes of the highly-anticipated race and each party’s campaign strategy. Photo illustration: Ang Li

The Wall Street Journal Interactive Edition

While that is likely to weigh on sentiment, liquidity from central banks, increased fiscal spending and the vaccine rollout provide a counterbalance to the concerns over growth, he added. The rally in U.S. stocks is likely to continue, he added.

“The market will stay bullish, regardless of which side wins” in Georgia, Mr. Perdon said. “The underlying theme is really the fear of missing out.”

In bond markets, the yield on the 10-year Treasury note ticked higher to 0.928%, from 0.915% Monday. Yields rise when prices fall.

Fresh figures on the strength of manufacturing activity in December are due from the Institute for Supply Management at 10 a.m. ET. Economists surveyed by The Wall Street Journal expect that factories continued to expand output in December, albeit at a slower pace than in November.

Overseas, the Stoxx Europe 600 ticked down 0.3%.

Hong Kong’s Hang Seng rose 0.6%. The Hong Kong-listed shares of China’s three largest telecommunications companies surged after the New York Stock Exchange reversed its decision to delist them. The previous plan followed a U.S. government order, signed by President Trump in November, that prohibits Americans from investing in a list of companies the U.S. government says supply and support China’s military, intelligence and security services.

Shares of
China Mobile,
which is among the most valuable of China’s listed state-owned enterprises, rose 5.1%, while
China Telecom
and
China Unicom
jumped 3.4% and 8.5%, respectively. China’s Shanghai Composite added 0.7%.

Japan’s Nikkei 225 edged down 0.4% by the end of trading.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com