Bush’s Win Lifts Stocks

Wall Street greeted President Bush’s reelection with a broad stock market rally Wednesday, led by sectors thought to benefit from his policies -- and potentially threatened by a Kerry administration.

Shares in defense, energy, healthcare and pharmaceutical companies were among those posting big gains.

At the same time, U.S. Treasury prices declined slightly and the dollar fell to near-record lows against the euro, both in reaction to record deficits that have accumulated during the president’s first term.

Analysts attributed the uptick in stocks to relief at seeing the better-known quantity prevail. “In the short run this is a celebration for the status quo,” said Jeffrey Saut, strategist at brokerage firm Raymond James.

In Wednesday’s active session, the Dow Jones industrial average advanced 101.32 points, or 1%, to 10,137.05. The broader Standard & Poor’s 500 index rose 12.66 points, or 1.1%, to 1,143.20. The technology-heavy Nasdaq composite gained 19.54 points, or 1%, to 2,004.33.

With a stronger showing than he achieved in the disputed election of 2000, Bush is expected to quickly pursue his top legislative priorities, including creating individual Social Security accounts that taxpayers could manage on their own. Such a system could be a windfall for Wall Street powerhouses such as Citigroup and Morgan Stanley.

Stocks in the banking-and-brokerage sector scored mostly modest gains Wednesday, however, possibly reflecting how tough it promises to be to enact so sweeping a change to one of the nation’s most sacrosanct safety-net programs.

“Any Social Security reform will be difficult,” said Greg Kelly, Washington analyst at Susquehanna Financial Group, a research, brokerage and trading firm. Bush is going to “have to put a lot of his political capital on the line.”

Stocks seen as benefiting from the president’s policies were among the day’s big winners. Among aerospace companies, General Dynamics rose 3.8%; in the drug sector, Amgen rallied 6.5%; and in energy, Halliburton climbed 4.3%.

One group that declined conspicuously was thrift and mortgage-company stocks. Bush is expected to crack down on the quasi-governmental mortgage lenders Fannie Mae and Freddie Mac, which have been criticized for accounting irregularities and princely executive salaries. Fannie Mae fell $2.67 to $68.77, and Freddie Mac slid $1.25 to $65.99.

Wall Street’s relief over the Republican incumbent’s victory is likely to continue in the short term, some strategists said, noting that stocks had been trading sideways since the summer amid political uncertainty and terrorism fears.

But soon, investors are bound to refocus on the economy, they added.

“We need to get some bona fide job creation in this economy right now,” said Shelly Meyers, portfolio manager at Pacific Global Investment Management in Glendale. She said the October employment report, due Friday from the Labor Department, and next week’s meeting of the Federal Reserve might offer clues as to where the economy is headed.

Here is a look at how key industry sectors in California and the nation performed Wednesday:

Healthcare

The healthcare sector -- from pharmaceuticals to managed-care providers and biotech firms -- got a big lift that analysts tied directly to Bush’s triumph.

Drug companies, some believed, had faced the prospect of price controls under the Democratic challenger, Sen. John F. Kerry.

Bush’s reelection also helps ensure implementation in 2006 of the Medicare prescription drug benefit plan, which bars the government from using its purchasing power to negotiate discounts. Pfizer added 75 cents to $29.45, and Eli Lilly increased $1.51 to $56.63.

“It’s really a tremendous financial windfall for the pharmaceutical industry,” said UCLA public health professor Gerald Kominski.

Health insurance stocks also advanced. Cypress-based PacifiCare Health Systems shot up $6.56, or 19%, to $41.20, after reporting better-than-expected profit. As the largest private Medicare provider, PacifiCare should do well under Bush, who supports an expanded role for companies in the government medical insurance program for seniors, analysts said.

Biotech shares gained, with Thousand Oaks-based Amgen picking up $3.56 to $58.55, and Genentech of South San Francisco rising $2.80 to $48.75. But StemCells, a Palo Alto firm that develops treatments based on embryonic stem cells, declined despite passage of a California ballot initiative devoting $3 billion for research in the field. Unlike Kerry, Bush is considered unlikely to expand government funding in this area. StemCells fell 97 cents to $3.14.

Aerospace and defense

Lockheed Martin, Boeing and Northrop Grumman climbed as investors anticipated that the biggest military buildup in decades would continue, at least for now.

Lockheed jumped $1.78 to $55.89, Boeing added $1.27 to $51.15, and Northrop rose $2.10 to $53.75.

That was good news for many of the 60,000 Southland workers employed by Chicago-based Boeing and Century City-based Northrop.

Still, analysts and defense executives cautioned that the long-term outlook may not be quite as bright. After a “great five years” of defense budget increases, “we’re starting to see flattening on spending,” James Albaugh, president of Boeing’s defense business, said at an investor’s conference Wednesday.

With the costly military operations in Iraq and the federal government facing record deficits, the Pentagon’s spending priorities are likely to be revamped, with large-ticket items such as fighter jets and military ships taking the biggest hits. But the market for radar, sensors and other equipment used to fight terrorism should remain robust.

Energy

Four more years with a former oil man in the White House is good news for ChevronTexaco and other producers of crude.

Bush is expected to continue filling the nation’s Strategic Petroleum Reserve, taking oil off the market at a rate of 100,000 barrels a day, noted David Goldwyn, president of Washington-based Goldwyn International Strategies. Kerry had been expected to stop filling the reserve, which might have helped tamp down oil prices.

After falling early in the day on news of higher inventories, U.S. crude prices jumped $1.26, to $50.88 a barrel. San Ramon, Calif.-based Chevron gained $1.07 to $53.17, and Occidental Petroleum of Los Angeles rose $1.52 to $56.45. Exxon Mobil, the nation’s largest oil company, was up 84 cents to $49.27.

“The market realized that Bush was reelected and, for better or worse, they assumed this means continued instability in the Middle East,” said Rick Mueller, senior oil analyst at consulting firm Energy Security Analysis Inc. In addition, “there probably was some feeling that the economy may do better under Bush, and that would keep the pressure on supplies,” he said.

Analysts also pointed out that the president was poised to push for more drilling rather than conservation, starting with a run at the Alaskan Arctic National Wildlife Refuge.

Telecom and media

The broad market rally helped bump up stock prices in the telecommunications industry. But shares in AT&T; and MCI, which have been fierce competitors of the major regional network owners such as SBC Communications, probably would have risen much more on a Kerry victory, said analyst Vik Grover of Needham & Co. in New York.

That’s because the rivals have been battered by phone competition rules, which turned against them this year under the Bush administration anda Republican-led Federal Communications Commission. A Kerry White House was expected to have been friendlier to these companies.

Still, AT&T; gained 9 cents to $17.44 while MCI rose 3 cents to $17.25.

The network owners, which have more control over their lines, fared better. SBC gained 18 cents to $25.70, and Verizon Communications, the nation’s largest phone company, rose 56 cents to $40.56. BellSouth rose 20 cents to $26.61.

Meanwhile, media stocks increased as the Bush win spurred hope that deregulation of the communications industry would continue -- or at least not be rolled back.

Time Warner increased 31 cents to $16.59, even though it disclosed that third-quarter profit dropped 7.8%. Tribune, which has been pushing to eliminate a federal ban on newspaper-broadcast cross-ownership, climbed 35 cents to $43.63. Tribune owns the Los Angeles Times and television station KTLA.

Kerry had opposed the FCC’s relaxation of media ownership rules.

Technology

Technology stocks were mixed Wednesday, and it was not clear what effect, if any, Bush’s win had on the sector.

Stalwarts such as Microsoft and Dell were up, and Apple Computer of Cupertino, Calif., hit a new 52-week high, gaining $1.81 to $55.31. But semiconductor stocks were largely down, as an industry trade group cut its forecast for chip sales in 2005.

Silicon Valley Manufacturing Group President Carl Guardino said that one threat -- the possibility that Kerry would make it tougher to send work offshore, a common tech practice -- was eliminated by Bush’s reelection.

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Wall Street reacts

Bush’s win cheered the stock market overall but some sectors did better than others.

Percentage gain or loss Wednesday in a sampling of Standard & Poor’s 500 sector indexes

*--* Biotech 5.04% Healthcare services 5.03 Oil and gas drilling 4.13 Pharmaceuticals 2.74 Tobacco 2.64 Aerospace 2.51 Agriculture 2.08 Semiconductors -0.46 Thrifts and mortgage finance -1.91

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Source: Bloomberg News

Times staff writers Peter Pae, Lisa Girion, Elizabeth Douglass, James S. Granelli, Jube Shiver Jr. and Joseph Menn contributed to this report.