An Election Day Rally On Wall St.
Wednesday, November 5, 2008
Stocks staged the largest Election Day rally in history yesterday, bucking tradition and casting aside growing evidence that the country is slipping into a recession.
The end of the presidential contest between Sen. John McCain (R-Ariz.) and Sen. Barack Obama (D-Ill.) eliminates some uncertainty at a time when traders are searching for an end to the recent market volatility and trying to grasp the breadth of a recession that many assume has already begun, analysts said. Yesterday's gains were across the board and included a rally in energy stocks as oil prices surged.
The Dow Jones industrial average was up 3.28 percent, or 305.45, to 9625.28, while the Standard & Poor's 500-stock index was up 4.08 percent, or 39.45, to 1005.75. The tech-heavy Nasdaq composite index rose 3.12 percent, or 53.79, to 1780.12.
The rally was a departure from usually subdued Election Day trading. The Dow had not moved more than 1 percent in either direction on the day of a presidential election since 1984, when Ronald Reagan beat Walter Mondale and the Dow rose 1.21 percent. The day after the election usually brings a more significant bounce, analysts said.
"This rally is all about the election," said Christopher Low, chief economist at Memphis-based FTN Financial. "Whoever wins, most of us voted for him, most of us will be happy tomorrow, and that tends to be market-positive."
Investors also appeared to be focused on growing evidence that government efforts to address the credit crisis may be working and to shrug off signs that the economy is worsening.
U.S. factory orders fell 2.5 percent in September compared with September 2007, according to Commerce Department data. The decline, steeper than most observers expected, means that there will be less economic activity in the coming months, stretching the economic downturn into 2009, analysts said. "If you think this is down, wait until you see October," Low said.
Consumer bankruptcy filings surged 40 percent, to 106,266, in October compared with the same period last year, according to the American Bankruptcy Institute. This is the first time monthly bankruptcy filings have topped 100,000 since the laws were toughened in 2005.
"The political environment has added hope of quick positive action to the current economic problems, but whoever wins, and regardless of Senate makeup, it will be a tough journey," Howard Silverblatt, S&P's senior index analyst, said in a research note yesterday.
Meanwhile, investors also digested a mixed set of earnings reports yesterday.
MasterCard, the second-largest credit card firm, surged 18 percent, to $170.24 a share, after it beat analysts' expectations during the third quarter and said it still expected to meet its profit and revenue targets this year. Excluding a charge for a legal settlement, MasterCard earned $322 million during the quarter, according to results released after the markets closed Monday.
But Tenet Healthcare, a hospital operator, posted disappointing earnings and cut its 2008 profit forecast 9 percent. The company also said it would be difficult to achieve a profit of $1 billion in 2009 as previously forecast. Tenet was the leading loser on the S&P, falling 37 percent, to $2.61 a share.
The price of crude oil, which declined recently, reversed course yesterday. It rose 10 percent, settling at $70.53 a barrel on the New York Mercantile Exchange. The increase in prices helped boost energy companies, which were among the big gainers on the Dow. Exxon Mobil was up 4.3 percent, to $77.49, while ConocoPhillips soared 8.2 percent to $55.77.