Shares on Wall Street have ended higher in choppy trading, as investors took advantage of the previous session’s slump to buy them back, ahead of the outcome of Senate elections in Georgia.

The battleground state run-offs will determine the balance of power in Washington.

Overall, analysts expect the stock market to consolidate December’s gains in January, as asset managers look to rebalance their portfolios that had been heavily tilted toward equities.

The latest polls give a slight edge to the two Democratic challengers in Georgia who need to win both races for Democrats to gain US Senate control from Republicans.

Along with their narrow majority in the House of Representatives, a “blue sweep” of Congress could usher in larger fiscal stimulus.

It could also pave the way for president-elect Joe Biden to push through greater corporate regulation and higher taxes.

“Having a divided government is what generally investors want, whether you’re a Democrat or Republican. Investors prefer checks and balances,” said Jack Ablin at Cresset Capital Management in Chicago.

“My sense is we may get some clarity around the runoff by tomorrow, so why invest today?”

The Cboe Volatility Index flip-flopped after closing at its highest level in two months on Monday, which saw Wall Street’s main indexes drop to two-week lows as investors booked profits at the start of the year.

Unofficially, the Dow Jones Industrial Average rose 177.52 points, or 0.59 per cent, to 30,401.41, the S&P 500 gained 27.37 points, or 0.74 per cent, to 3,728.02 and the Nasdaq Composite added 124.30 points, or 0.98 per cent, to 12,822.75.

Energy stocks jumped on the back of higher oil prices.

Consumer staples, utilities and healthcare were the laggards.

“We’re somewhat worried about the high expectations (on stocks) among investors,” Ablin said.

“We looked at things like bullish sentiment, which is not at an extreme but it’s certainly higher than normal. Margin balances are also pretty high, also suggesting a fair amount of complacency.”

Although the start of vaccine rollouts and massive monetary support powered the major US stock indexes to record levels recently, the discovery of a more contagious variant of the coronavirus and the latest virus-related curbs have muddied the economic outlook.

Britain, where new variant first emerged, began its third national lockdown, while New York on Monday found its first case of the highly contagious mutation of the coronavirus.

In terms of economic data, US stocks got a boost from a survey by the Institute of Supply Management, which showed manufacturing activity rose to its highest level in nearly 2-1/2 years in December, likely as spiraling new COVID-19 infections pulled demand away from services towards goods.

Chipmaker Micron Technology Inc rose after Citigroup raised its rating on the stock to “buy” on expectations of a recovery in demand and pricing for DRAM chips.

US-listed shares of China Telecom Corp Ltd and China Mobile Ltd both gained, while those of China Unicom Hong Kong Ltd advanced after the NYSE reversed its decision to delist.