Market watchers expect the U.S. stock market to surge at Wednesday’s open, as Wall Street bets that President George W. Bush has likely won re-election at the nation’s president, even as results from the key state of Ohio remain unsettled.
In the early hours of Wednesday morning, as it looked more likely that Bush would win key electoral votes in the state of Ohio, U.S. stock futures and overseas stock markets moved sharply higher, indicating the U.S. market would surge at the start of regular trading hours. U.S. Treasury debt prices swung lower.
“I think we are going to rock today,” said Kent Engelke, markets strategist at Anderson & Strudwick. “The market views this as conclusive Bush victory. Wall Street hates uncertainty, and it appears that the uncertainty surrounding this election has almost gone.”
Investors appeared confident that a clear-cut winner would emerge Wednesday, despite questions over provisional ballots in Ohio that have delayed a final verdict and kept Kerry in the race. Four years ago, election results took a month to sort out, leading to a sell-off in the stock market.
For weeks, public opinion polls have been extremely close, with many showing a tie in the White House battle between President Bush and his Democratic contender, Sen. John Kerry, making it impossible for traders to predict a likely victor.
A clear Bush win is seen as positive for stocks, as the candidate is seen as friendlier to business noted Peter Cardillo, chief market strategist at New York brokerage S.W. Bach.
“And his election sends a clear message to the world that we remain a committed to fighting terrorism in an aggressive way, and I think the market takes that as a positive,” Cardillo said.
Michael Metz, chief investment strategist at Oppenheimer Company, said Bush is the darling of Wall Street. “It looks like they got what they wanted,” he said. “Traditionally, Wall Street thinks less regulation is better and they are fond of low taxes.”
Looking ahead, stock market analysts said a victory for Bush could be especially beneficial to stock sectors such as oil and defense, and the euphoria over the clear-cut election win could buoy the market for days to come. However, investors would soon return to focusing on the economic outlook, starting with this Friday’s monthly job creation report from the Labor Department’s, which will give a more comprehensive picture of the labor market.
“We’ll be giddy today, but we’ll soon return to the reality of the economic outlook,” said Kent Engelke.
Corporate earnings focus
The presidential election results overshadowed a fairly busy day for corporate earnings, with Time Warner Inc., the world’s largest media company, reporting a lower third-quarter profit as it established a $500 million legal reserve and said it will restate results for its AOL Europe unit prior to 2002.
Oil prices were also outdone by the election.
U.S. crude oil prices spiked 1 percent to move back above $50 a barrel as signs of an electoral victory for Bush raised the prospect of continued high U.S. demand and Middle East supply anxiety, dealers said. U.S. light sweet crude was up 65 cents to $50.27 in electronic trading.
Rising oil prices raise concerns that higher energy costs will pinch corporate profits.
Drug groups are expected to take a cue from gains among European peers as the market bets on a Bush win to reduce the threat of government-imposed price cuts.
Democrat Kerry has said he wants government health plans to negotiate lower prices direct with drug makers in a move that could lead to deep discounts on many U.S. medicines.
Meanwhile, retail and media companies dominate the earnings calendar, with clothing makers Polo Ralph Lauren Corp. and Tommy Hilfiger Corp., and coffee chain Starbucks Corp. reporting.
The Institute of Supply Management’s (ISM) October index for non-manufacturing business activity, such as services, is due at 10:00 a.m. ET, with an increase to 58 from 56.7 in the prior month forecast by economists.
U.S. factory and durable goods orders for September are also due out Wednesday, though the week’s key economic figure will be Friday’s employment report, market observers said. The auto sector will be a focus as domestic U.S. car and truck sales figures for October are also due for release.