Stocks climb as Massachusetts votes
Stocks rallied Tuesday, boosted in part by the prospect of a GOP victory in a Senate election that could derail Democrats’ healthcare overhaul.
The Dow Jones industrial average jumped 115 points, more than erasing a 100-point slide Friday. The market was closed Monday for Martin Luther King Day.
Shares of medical insurers and drug makers led the market higher as some investors bet that the late Sen. Edward M. Kennedy’s seat in Massachusetts would go to Republican challenger Scott Brown over Democrat Martha Coakley. That would deprive Democrats of the 60-vote majority they need in the Senate to stop a potential filibuster of the healthcare bill.
Brown clinched the election late Tuesday with about 52% of the vote.
If the healthcare legislation isn’t enacted, or is passed in a weakened form, that could be good news for earnings of some health-related companies.
In that sector, the day’s big winners included health-management firm Humana, whose shares shot up 7.1%, and Aetna, which rose 4.1%. Among drug companies, Lilly gained 4.4% and Merck added 2.9%.
But the rally went well beyond healthcare: Rising stocks outnumbered losers by more than 3 to 1 on the Big Board.
The broad advance reflected the greater meaning the Senate race had taken on, representing a referendum on the Obama administration’s policies in general, analysts said.
A Republican victory “would be less a healthcare story than a pro-business, Washington-gridlock story,” Art Hogan, market strategist at brokerage Jefferies & Co. in New York, said before the vote was counted. Investors betting on a victory for Brown, Hogan said, were figuring that “all of the [Obama] anti-business things you can think of would get delayed if not derailed.”
Yet on the healthcare reform question, House Majority Leader Steny H. Hoyer (D-Md.) suggested early Tuesday that the Senate could approve its version of the reform program before Brown, if elected, would be seated.
The Dow rose 115.78 points, or 1.1%, to 10,725.43. The broader Standard & Poor’s 500 climbed 14.20 points, or 1.3%, to 1,150.23. Both indexes set fresh 15-month highs.
The Nasdaq composite advanced 32.41 points, or 1.4%, to 2,320.40. The Russell 2,000 small-stock index gained 1.8%.
Jeffrey Saut, chief investment strategist at Raymond James & Associates, said the market could see a “blowoff to the upside” because of Brown’s victory.
But Saut thinks that would be a good excuse to finally take profits after the market’s 10-month surge. The Dow is up 64% from its 12-year low in March, and the rally has been interrupted along the way by only modest pullbacks -- nothing even approaching a 10% “correction.”
“If it does jump, I think on a trading basis it would be time to take some money off the table,” Saut said.
The tech sector rose sharply after an analyst upgraded telecom-gear maker Ciena. Its shares surged 11%.
Tech could be a focus of trading today. After the bell Tuesday, IBM posted a 9% increase in fourth-quarter profit and was upbeat about 2010. But its shares fell 2% after hours.