Stocks, Dollar Soar on Eve of Vote : Market Overview

One day before the presidential election, stocks soared in an apparent vote of confidence for the likely Democratic victory of Bill Clinton. The Dow Jones industrials jumped 35.93 points, or 1.1%, to close at 3,262.21.

* Interest rates rose in the bond market, but trading was generally quiet ahead of the election.

* The dollar shot higher, also apparently in a bet on a Clinton victory. Clinton is expected to launch a concerted federal effort to spur the economy, which could strengthen the dollar.

Stocks

Monday’s rally was no surprise to market historians: In 14 out of the last 16 elections, stocks have risen the day before the event.

Analysts said investors have begun to embrace expectations that Clinton will back a modest fiscal stimulus plan to boost the sluggish economy, thereby helping corporate profits.

“People are anticipating better than expected earnings over the next six months,” said Hersh Cohen, president of Shearson Asset Management.

In the broad market, advancing issues outnumbered declines by about 3 to 2 on the New York Stock Exchange. Volume was 203.28 million shares.

Even without Clinton, traders noted that recent economic reports suggest an improving picture. The Commerce Department reported Monday that construction spending rose 1.3% in September. Also, a corporate purchasing managers’ report showed that the economic recovery continued to creep forward last month.

With Monday’s gain the Dow has climbed 126 points, or 4%, since hitting a 1992 low of 3,136 on Oct. 9.

Among the market highlights:

* Industrial stocks that would gain from a stronger economy were the day’s stars. Boeing rose 1 to 37, GE leaped 1 3/4 to 78 1/2, International Paper added 1 to 65 3/4, Ford Motor jumped 1 7/8 to 38 3/8, Weyerhaeuser zoomed 1 3/8 to 38, and Deere advanced 1 3/8 to 40 7/8.

Also, troubled GM rose 1 1/8 to 31 7/8 as directors named John F. Smith Jr. CEO and announced a 50% cut in the cash dividend, which had been expected.

But GM Class E shares, representing GM’s Electronic Data Systems unit, lost 1 to 28 on concerns about the future of its dividend. GM H, representing Hughes Electronics, added 3/8 to 21 3/4.

* Railroads, another potential beneficiary of a healthier economy, gained. Burlington Northern added 1 1/8 to 39 1/8, CSX jumped 1 3/8 to 66 7/8, and Conrail rose 1 1/8 to 43 3/8.

* Retail stocks advanced on expectations that a Clinton victory will help consumer confidence and thus consumer spending, at least short-term. Dayton Hudson jumped 1 3/8 to 78, Mercantile Stores gained 1 5/8 to 32 1/8, Penney rose 1 3/8 to 76 7/8, Ross Stores leaped 1 1/2 to 18 7/8, and Wal-Mart rose 3/4 to 61 5/8.

* Recreational vehicle makers continued to rise on surprisingly strong demand for RVs. Fleetwood Enterprises gained 1 1/2 to 39 1/8, and Thor Industries added 7/8 to 15 5/8.

* Many small tech issues lured bargain hunters. Tekelec rose 1 to 9 3/4, International Rectifier added 3/4 to 11, and Xircom gained 3/4 to 9.

But Intelligent Electronics tumbled 2 1/4 to 8 1/2. The electronics retailer said talks had ended on the possible sale of its BizMart operations to OfficeMax.

* Two Southland issues reacted negatively to smaller than expected quarterly earnings gains: Health maintenance organization FHP International, which fell 1 to 17 3/4, and personal-organizer maker Day Runner, which tumbled 2 1/2 to 16 1/2.

* P. H. Glatfelter slumped 3 1/4 to 19 5/8. The company on Friday said it has been dropped as Philip Morris’ supplier of cigarette paper.

Overseas, London and Paris stocks jumped on prospects for lower interest rates after France cut two key rates. London’s Financial Times-100 index rose 29.5 points to 2,687.80, while Paris’ CAC-40 index added 11.53 points to 1,742.40.

But in Frankfurt, gloom about the corporate and economic climate pushed the DAX index down 19.75 points to 1,472.57.

In Tokyo, stocks staged a late technical rebound on futures-linked buying. The Nikkei average added 85.96 points to 16,853.36.

Credit

Interest rates rose across the board on election eve, but analysts said activity was relatively quiet.

The yield on the Treasury’s main 30-year bond was 7.66%, up from 7.62% Friday.

The discount rate on one-year Treasury bills rose to 3.45% from 3.38% on Friday.

Mark Green, economist with Wells Fargo Bank, said investors generally were staying away from bonds, waiting to see if indeed Clinton is elected President.

Bond yields have been rising since late September on expectations of a Clinton win. Bond investors fear that in stoking the economy Clinton also will stoke inflation and send interest rates up.

The fed funds rate, the rate on overnight loans between banks, was 3.13% versus 3.06% Friday.

Currency

The dollar was lifted by expectations of a Clinton victory and by falling interest rates in Europe.

A stronger U.S. economy would be expected to attract foreign capital here, thereby boosting the dollar. Meanwhile, with European economies languishing, falling interest rates there are causing investors to look for better alternatives for their money.

In New York, the dollar rose to 1.566 German marks from Friday’s 1.542. It also advanced to 123.60 Japanese yen from 123.40.

Commodities

Wheat prices soared after China bid for 2 million metric tons of wheat via a U.S. subsidy program.

Other grains also rose on hopes that Agriculture Secretary Edward Madigan and European Community Farm Commissioner Ray MacSharry might resolve a dispute over oilseed subsidies during their second day of meetings in Chicago.

Wheat for December jumped 8.25 cents to $3.63 a bushel in Chicago.

Elsewhere, energy futures were higher on the New York Merc, with December light, sweet crude oil up 15 cents to $20.77 a barrel.

Gold added 50 cents to $339.90 an ounce on New York’s Comex; silver added 3 cents to $3.79.

Market Roundup, D8