U.S. stocks were mostly higher on Tuesday, led by gains in the Energy sector. Utilities lagged. The Energy sector was up 5% on Tuesday as crude oil prices surged 5%. The gains came as Saudi Arabia announced a surprise 1-million barrel cut in production. Saudi Arabia said this was a new years gift to the market. Residents of George went to the polls on Tuesday for the runoff of two senate races. Going into the trading session, the polls showed that candidates were even. U.S. manufacturing was more substantial than expected in December, driven by gains in supplier deliveries.
Saudi Arabia said it would unilaterally cut 1 million barrels a day of its current crude production quota in January. The announcement came after the Saudis had agreed that OPEC would keep output flat, part of a now monthly assessment. In that deal, the two groups, collectively called OPEC-plus, agreed to a complicated deal to hold production unchanged from current levels. The cut by the Saudi will offset increases in production by Russia.
US ISM Comes in Better than Expected
U.S. manufacturing activity increased to the highest level in nearly 30-months in December. According to the Institute for Supply Management (ISM), its national factory activity index rebounded to a reading of 60.7 last month. That was the highest level since August 2018 and followed 57.5 in November. Expectations were for the index to slip to 56.6 in December. Most of the gains were due to a strong rebound in supplier deliveries. This measure rose to 67.7 in December from 61.7 in November.
The ISM’s new orders sub-index rose to a reading of 67.9 last month from 65.1 in November. Strong order growth boosted manufacturing employment, which had contracted in November. The ISM’s manufacturing employment gauge rebounded to 51.5 from a reading of 48.4 in November. The survey’s prices paid index jumped to a reading of 77.6 last month, the highest since May 2018, from 65.4 in November.