Early Surge Cut but Dow Ekes Out Small Gain : Traders Await Vote Tally; Blue Chip Index Up 2.85
The stock market held onto slight gains after a strong Election Day opening Tuesday in anticipation of a victory by Republican George Bush in the presidential vote.
But analysts said that once the election is over, the market will refocus on interest rates and other worries that have chilled the market recently.
The Dow Jones industrial average advanced 2.85 to close at 2,127.49, near its low of the day. The blue chip indicator had gained more than 14 in early trading.
In the broader market, advancing issues outpaced declines by about 3 to 2 in nationwide trading on the New York Stock Exchange.
Market analysts said stocks rose on early buying by investors anticipating a Bush victory, and the advance was supported by firmer U.S. bond prices and a stronger dollar. But equities later retreated along with bonds.
Despite the widespread view on Wall Street that Bush will prevail, few participants wished to be caught long or short in their positions by the end of the day, prompting a last-minute selloff from earlier highs, traders said.
Brokers stressed that trading was muted ahead of the election tallies.
Fed Role Seen
“Everyone’s waiting for the election results,” said trader Kenneth Sheinberg at Shearson Lehman Hutton Inc. “The basic tone is very positive, but no one wants to play (stocks) going into the election. Sheinberg said that even a “remote possibility Dukakis may win,” was enough to persuade investors to stay out of the market altogether. “People are not willing to take chances,” he said.
Jon Groveman, head trader at Ladenburg Thalmann & Co., said the market could have a brief emotional rally today if Bush wins, but said it will likely be cut short as investors turn their attention to uncertainties about the direction of interest rates and the dollar.
“I expect short-term rates will continue to go up and that the Federal Reserve will be more in control between now and Jan. 20 (when the new president takes over),” said Rao Chalasani, a market strategist with Prescott Ball & Turben.
“It’s a strange thing. We almost have to get the election out of the way in order to focus on the issues,” said Hugh Johnson, senior vice president for First Albany Corp. “People are taking a deep breath and just starting to think about that.”
The stock market also got early support from higher bond prices and a stronger dollar in foreign exchange trading as well as technical factors. The market had declined sharply in two previous sessions on what many analysts said was concern about the economy and uncertainty about the outcome of the presidential election.
Volume Light
Despite the early gains, stock prices faded early with few institutional investors to lend the market support. Many banks and insurance companies were closed for Election Day, and volume was relatively light.
NYSE volume totaled 141.66 million shares, up from 133.87 million in Monday’s session.
On the Tokyo Stock Exchange, prices staged a recovery Tuesday after faltering early in the session. The Nikkei 225-share index rose 140.91 to close at 28,007.27. It fell 180.39 on Monday.
Share prices also rose sharply on the London Stock Exchange on speculation that Bush would win the election. The Financial Times 100-share index rose 20.9 to 1,840.6.
