US stocks surge as Bush wins another four years

Wall Street celebrated President George Bush’s re-election with a solid rally today, surging higher as investors welcomed continuity in Washington and shrugged off higher oil prices.

Sam Stovall, chief investment strategist at Standard & Poor’s, characterised the advance as “a Republican-inspired relief rally”.

After weeks of worry that there would be no clear winner, the stock market would probably have gone up either way, but the fact that the victory went to the Republican incumbent, who is widely perceived as more business-friendly than Democrat John Kerry, might have added to Wall Street’s cheer, he said.

“I think the market was relieved that we came to a fairly rapid conclusion,” Stovall said. “We probably would have seen a rally if Kerry had been elected as well, simply because it would have resolved the issue. But with a Republican win, there might be some stronger legs underneath it.”

The Dow closed up 101.32, or 1.01%, at 10,137.05.

The broader gauges also finished higher. The Standard & Poor’s 500 index added 12.64, or 1.12%, to close at 1,143.20. The Nasdaq composite index rose 19.54, or 0.985, to 2,004.33, its highest close in four months, putting it back in positive range for the year. The Dow still has a loss for 2004, while the S&P 500 has a gain.

Anxiety about the outcome of the election hobbled the market for weeks, keeping stocks in a tight trading range. While Wall Street was obviously pleased with the result, analysts warned the week could end with some profit-taking as investors started refocusing on the economy.

In the first piece of post-election economic news, the Commerce Department reported that orders to US factories declined for a second month in a row, slipping by 0.4%, or 1.3 billion in September to 368.4 billion. Demand dropped sharply for all manufactured goods except defence materials. It was the first back-to-back monthly decline since November-December, and fell far short of the 0.5% increase projected by economists.

High energy prices have also weighed heavily on stocks in recent weeks, although crude has moved back from its record highs over the past several sessions.

It was back on the rise following the government’s weekly fuel report, however.

Initially, a bigger-than-expected 6.3 million barrel run-up in crude supplies seemed to overshadow a 900,000 barrel drawdown in heating oil.

But with traders expecting a slight build, the seventh week of heating oil declines seemed to take a toll, especially in the face of rising concern that high energy costs this winter could cut into consumer spending. Light, sweet crude for December delivery settled up 1.26 at 50.88.

With the election resolved, several sectors of the market that had come under pressure at the prospect of a Kerry win posted gains. Among these were pharmaceutical stocks, which might have suffered if Kerry had gone through with a plan to import cheaper drugs from abroad. Merck was up 1.07, or 4%, at 27.87, and Pfizer added 75 cents, or 2.6%, to 29.45.

Defence stocks soared as well as investors anticipated continued spending on military projects overseas. Boeing climbed 1.27, or 2.6%, to 51.15, General Dynamics added 3.79, or 3.8%, to 104.27 and Northrop Grumman surged 2.10, or 4.1%, to 53.75.

In the midst of the post-election fever, there was also some earnings news influencing trading.

Cigna closed up 1.84, or 2.9%, at 65.29, after reporting a 64% surge in third-quarter income on growth in the health insurer’s indemnity business and sales gains in retirement benefits. The company also raised its earnings estimates for the full year.

Time Warner added 31 cents to 16.59, despite an 8% slide in third quarter earnings, due in part to a 500 million reserve the company set up to contend with pending government investigations. The company also said it would restate its accounting for its stake in AOL Europe prior to 2002.

Advancers outnumbered declining issues by more than 3 to 1 on the New York Stock Exchange.

The Russell 2000 index, which tracks smaller company stocks, was up 9.89, or 1.69%, at 595.33.