Stocks, Dollar Soar on Eve of Vote : Market Overview
One day before the presidential election, Wall Street stocks soared, as investors braced for the outcome with a mixture of hope and relief. The Dow Jones average climbed 35.93 points to 3,262.21, continuing to recoup ground it lost in late September and early October.
* Interest rates rose as a pre-election quiet pervaded the bond market. The yield on the Treasury’s main 30-year bond was 7.66%, up from 7.62% Friday. Its price, which falls when the yield rises, was half a point lower, or $5 per $1,000 in face amount.
* The dollar staged a strong advance as the market anticipated increased government spending and higher interest rates if Gov. Bill Clinton is elected President.
Stocks
Analysts noted that in 14 out of the last 16 elections, stock prices have risen the day before the event.
They said despite uncertainty over the outcome, the market appears to have factored in a win by front-runner Bill Clinton.
Wall Street has embraced expectations that Clinton will back a modest fiscal stimulus plan to boost the sluggish economy, a plus for stocks but not bonds.
In the broader market, advancing issues outnumbered declines by about 3 to 2 on New York Stock Exchange volume of 203.28 million shares, up from Friday’s 201.93 million.
Analysts said hopes that the economy is gathering momentum going into the presidential election helped the market.
The Commerce Department reported that construction spending rose 1.3% in September.
A purchasing managers’ report showed that the recovery continued to creep forward last month. The numbers exceeded analysts’ expectations.
Among the market highlights:
* General Motors jumped 1 1/8 to 31 7/8 as directors named John Smale chairman and John F. Smith Jr. chief executive, at the same time that they halved the company’s quarterly dividend.
The actions marked the culmination of a recent move by the board to shake up the struggling auto maker.
* Other blue chip gainers included Philip Morris, up 1 at 77; International Business Machines, up 2 1/8 at 69; Merck, up 7/8 at 44 3/4, and General Electric, up 1 7/8 at 78 1/2.
* Intelligent Electronics, the most active NASDAQ issue, fell 2 1/4 to 8 1/2. The company said talks had ended on the possible sale of its BizMart operations to OfficeMax Inc.
* P. H. Glatfelter, traded on the American Stock Exchange, fell 3 1/4 to 19 5/8. Late Friday, the company said it received notice that Philip Morris will drop a longtime supplier arrangement with Glatfelter’s Ecusta division.
Economic recovery hopes benefited a range of stocks in basic industries considered sensitive to the ups and downs of the economy.
* Aside from GM in the auto group, Ford Motor rose 1 7/8 to 38 3/8 and Chrysler 3/8 to 27 1/2.
* Bristol Myers gained 3/4 to 68 7/8. Smith Barney upgraded its rating to hold from under-perform and raised its 1993, 1994 and 1995 earnings estimates on the company.
* Among paper and other forest products stocks, International Paper gained 1 to 65 3/4, Georgia-Pacific 1 3/8 to 58 1/2 and Weyerhaeuser 1 3/8 to 38.
* In the railroad sector, Burlington Northern added 1 1/8 to 39 1/8, CSX 1 3/8 to 66 7/8, Norfolk Southern 7/8 to 61 3/8 and Union Pacific 1 5/8 to 56 7/8.
Overseas, London stock exchange prices jumped on the prospect of lower interest rates. The 100-share Financial Times average rose 29.5 to 2,683.7.
Gloom about the corporate and economic climate pushed Frankfurt’s 30-share DAX average down 19.75 points to 1,472.57.
Stocks staged a late technical rebound in Tokyo on futures-linked buying. The 225-share Nikkei average added 85.96 points to 16,853.36.
Credit
Mark Green, an economist with Wells Fargo Bank in San Francisco, said investors were staying out of the bond market, watching to see who was going to win the presidential election.
“There haven’t been a lot of people trading,” Green said. “That’s why you had a lot of volatility.”
At the same time, Green said, “The markets ignored the economic data that has come out.
“The focus is squarely on the election,” he said.
The federal funds rate, the interest on overnight loans between banks, was 3.125%, up from 3.063% Friday.
Currency
Dealers said the dollar was boosted by polls showing Clinton ahead of President Bush on the eve of today’s vote.
Traders believe that if elected, Clinton will increase government spending to stimulate the economy, which would probably result in higher interest rates.
High interest rates make dollar-denominated securities more valuable to investors, increasing demand for the U.S. currency.
In New York, the dollar rose to 1.566 German marks from Friday’s 1.542 and 123.60 Japanese yen from 123.40. The British pound fell to $1.534 from $1.557.
Commodities
Grain and soybean futures prices soared on the Chicago Board of Trade amid signs that foreign interest in U.S. wheat is picking up and optimism about the progress of trade talks in Chicago. Wheat for December delivery settled up 8.25 cents at $3.628 a bushel.
On other markets, cocoa was higher, precious metals advanced, and livestock and meat futures gained.
Elsewhere, energy futures were higher on the New York Mercantile Exchange, with December light, sweet crude oil gaining 15 cents to $20.77 a barrel.
Gold closed up 50 cents at $339.90 an ounce, and silver added 3 cents to $3.792 an ounce.
Market Roundup, D8
