Wall Street is also an election winner
Wall Street enjoyed its biggest-ever election day rally Tuesday as stock prices appeared to reflect hopes for better days ahead.
The Dow Jones industrial average soared more than 300 points, with its 3.3% gain easily topping the previous voting-day record set in 1984.
Despite the lack of easy solutions to the global economic maelstrom, investors said the conclusion of the months-long presidential race would enable the winner to focus on policies for overcoming the crisis.
Unlike past elections after which the president-elect largely stayed on the sidelines until taking office the following January, Tuesday’s winner and his team are expected to work closely with current Treasury Department officials in determining how the remainder of the government’s $700-billion bailout package will be earmarked.
“We’ve all known this was coming but now that it’s here people are thinking we’re finally going to remove one key element of uncertainty,” said Stuart Schweitzer, market strategist at J.P. Morgan Private Bank. “There’s a lot of hope that whoever wins will quickly announce at least the team members of their cabinet, and we’ll have a basis for a little bit more confidence in the direction of policy.”
The Dow Jones industrial average closed near its high of the day, finishing up 305.45 points at 9,625.28.
The blue-chip average’s previous election-day record was a 1.2% advance in 1984, when Ronald Reagan trounced Walter Mondale. Before 1984, the stock market took the day off for presidential elections.
The Dow’s gain extended its recovery from its 5 1/2 -year closing low on Oct. 27 to 1,450 points, or 18%.
The Standard & Poor’s 500 index climbed 39.45 points, or 4.1%, to 1,005.75. The Nasdaq composite index rose 53.79 points, or 3.1%, to 1,780.12.
The Dow and the S&P; 500 closed at their highest levels since Oct. 6. The Nasdaq’s close was the highest since Oct. 14.
The market was paced by signs of a further easing of credit markets and by speculation that the federal government would inject capital into a wider range of financial entities, including large commercial-finance companies.
The lending rate for three-month interbank loans dropped to 2.71% from 2.86% on Monday and 4.82% less than a month ago, suggesting banks were becoming more willing to lend to one another.
The dollar dropped sharply against the euro as fears over the depth of a global recession subsided a bit. The euro rose to $1.295 from $1.263 on Monday.
Stocks shook off a fresh dose of bad economic news as the Commerce Department reported that factory orders tumbled 2.5% in the third quarter, far more than expected. That came on the heels of gloomy economic data Monday, including a plunge in auto sales.
Shares also overcame a jump in oil prices Tuesday, which many investors viewed as unsustainable given the weak global outlook.
“No matter who wins this election, the economy is not going to bounce back fast. Energy demand in places like China is not going to be strong,” said Phil Flynn, senior market analyst at Alaron Trading Corp. in Chicago. “By the end of the week, this may have amounted to just a small selling opportunity.”
Crude futures jumped $6.62 to $70.53 a barrel in New York trading.
Energy stocks surged 6.4%, outperforming all other broad industry groups in the S&P; 500. Commodity stocks increased 5.7%, followed by industrial shares, which advanced 5.5%.
Financial shares rose 5.5% on speculation that firms such as bond insurers and commercial-finance companies could receive capital infusions from the government. CIT Group soared 36%, while Principal Financial Group surged 23%.
Shares of MasterCard jumped more than 18%, thanks partly to strong overseas results reported by the credit card giant.
Some investors say the stock market is going through a bottoming process and won’t fall below last month’s lows unless the economy weakens much more than expected. Others expect stock prices to resume their downtrend in the face of a softening economy and sinking corporate profits.
“If you look at the economic data that’s come out over the last two days you’d say, ‘Why would anybody in their right mind buy stocks?’ ” said Bill King, chief market strategist at M. Ramsey King Securities Inc. in Burr Ridge, Ill. “I’d say another three days to a week and then [the rally’s] going to fall apart.”
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Ronald D. White contributed to this report.
