U.S. Stocks Advance in Biggest Election Day Rally Since 1984

By Elizabeth Stanton

Nov. 4 (Bloomberg) — U.S. stocks advanced in the biggest presidential Election Day rally in 24 years, led by energy and banking shares, on rebounding commodity prices and speculation the Treasury will bail out more financial companies.

General Electric Co. added 7.6 percent while CIT Group Inc. and Principal Financial Group Inc. climbed more than 22 percent after people briefed on the matter said the government may broaden the focus of its rescue program. Exxon Mobil Corp. and Chevron Corp. led all 40 energy shares in the Standard & Poor’s 500 Index higher as oil gained. Archer Daniels Midland Co. rose 15 percent after profit more than doubled at the world’s largest grain processor.

“The market has come to the conclusion that Armageddon is off the table,” said Philip Orlando, who helps manage $330 billion as chief equity strategist at Federated Investors Inc. in New York. “The elimination of the uncertainty of the campaign typically results in an end-of-year rally and you’re starting to see that today.”

The S&P 500 added 39.45 points, or 4.1 percent, to 1,005.75, its first close above 1,000 since Oct. 13. The Dow Jones Industrial Average rose 305.45, or 3.3 percent, to 9,625.28. The Nasdaq Composite Index advanced 53.79, or 3.1 percent, to 1,780.12. Gains in Europe and Asia sent the MSCI World Index to a sixth straight advance.

Today’s advance in the S&P 500 and Dow average are the biggest for a presidential Election Day since the NYSE first opened for trading during voting in 1984. The S&P 500 rose on four and fell on two of the previous presidential election days since then, averaging a 0.3 percent gain.

`Big Change’

The winner between Democrat Barack Obama, who leads in national polls, and Republican John McCain will contend with an economy crippled by declining profits and the highest unemployment in five years.

“We keep getting reminded of how bad things are and how we need change, and I’m talking about from both candidates,” said Michael Holland, New York-based chairman of Holland & Co., which oversees more than $4 billion. “We’re moving forward now.”

About 1.3 billion shares changed hands on the floor of the NYSE, 10 percent less than the three-month average. The Chicago Board Options Exchange Volatility Index, or VIX, which measures the cost of using options as insurance against S&P 500 declines, dropped 11 percent to a one-month low of 47.73.

Concern economic growth is slowing sent the S&P 500 down 17 percent in October, the steepest monthly loss since 1987. The month’s sell-off erased more than $9.5 trillion from the value of stocks worldwide, almost one-third of the total value wiped out this year, as credit-related losses and writedowns by financial firms approached $700 billion.

`Looking to Add’

The S&P 500 has rebounded 18 percent since reaching a five- year low on Oct. 27 as global interest-rate cuts and government attempts to shore up banks spurred a 23 percent gain in the index’s financial shares.

The dollar fell the most against the euro since the 15- nation currency’s 1999 debut on diminishing demand for the safety of the U.S. currency. Other signs investors are regaining their appetite for risk include a 40 percent drop since Oct. 27 in the cost of using options to hedge against declines in the S&P 500, rising industrial metals prices and outperformance by emerging market stocks.

“There has been some discussion about a post-election rally,” JPMorgan Chase & Co. strategist Thomas Lee wrote in a note to clients. “We have had more than one conversation with investors about what `we will be looking to add’ after the elections.”

Wider `TARP’

General Electric, whose GE Capital arm is the largest U.S. non-bank finance company, rose $1.47 to $20.77. CIT Group, the largest independent U.S. commercial lender, climbed $1.63, or 36 percent, to $6.15 for the best advance in the S&P 500.

GE and CIT Group are among companies that may be helped by an expansion of the government’s plan to shore up the financial system, the people briefed on the matter said. After allocating $250 billion for government investments in banks, Treasury Secretary Henry Paulson is considering taking stakes in nonbank financial companies, the people said.

Initially, the Troubled Asset Relief Program was intended to buy mortgage-backed securities and other assets for which investor demand had dried up.

CIT Group said it is considering whether to participate in the program. A GE spokesman said the company would evaluate any government offer.

Principal Financial Group Inc. surged 23 percent to $27.50 after saying it is eligible for federal assistance. Principal’s holding company is regulated as a savings and loan, which qualifies the firm for government programs, Chief Executive Office Larry Zimpleman said on a conference call today. Insurers in the S&P 500 climbed 6.4 percent as a group.

Money Markets

Financial shares in the S&P 500 jumped 5.5 percent as a group, also boosted by further declines in money-market rates. The London interbank offered rate, or Libor, that banks charge each other for one-month loans slid 18 basis points to 2.18 percent today, the lowest level since November 2004, and the 17th straight decline, according to British Bankers’ Association data. The three-month rate dropped 15 basis points to 2.71 percent, the lowest level since June 9, according to BBA figures.

Tokyo’s three-month interbank rate slid 9.8 basis points to 0.791 percent, the biggest drop since December 1999, while the three-month rate in euros fell 3 basis points to 4.70 percent, the lowest level since March 25.

JPMorgan, the largest U.S. bank by market value, rose 3.5 percent to $42.17. Citigroup Inc. climbed 4.9 percent to $14.68.

Energy Rally

Energy companies advanced 6.4 percent as a group after crude oil and natural gas led a rally in commodities. Exxon Mobil, the world’s biggest oil company, climbed 4.3 percent to $77.49. Chevron, the second-largest U.S. energy company, added 6.1 percent to $78.19.

Crude oil surged 10 percent to settle at $70.53 a barrel in New York, its highest close since Oct. 21, on speculation stock market gains signal an eventual rebound in global economic growth.

Expeditors International of Washington Inc. climbed 18 percent to $37.75. The transportation services company reported third-quarter earnings per share, excluding some items, that exceeded the average analyst estimate in a Bloomberg survey by 6.9 percent.

ADM rallied $3.22 to $24.33. First-quarter profit, excluding some items, was $1.62 a share, beating the average analyst estimate of 72 cents, boosted by better results from processing soybeans and handling grain.

Earnings Watch

MasterCard Inc. jumped $26.35, or 18 percent, to $170.24 after posting third-quarter earnings excluding some items of $2.47 a share, exceeding the average analyst estimate by 11 percent on higher overseas revenue. The company also pledged that expenses won’t increase next year.

American Express Co. advanced 5.3 percent to $29.82 and Visa Inc. jumped 14 percent to $59.81.

Emerson Electric Co. advanced 10 percent to $35.86. The world’s largest maker of power equipment for oil companies said fiscal fourth-quarter profit rose 10 percent, more than analysts estimated, as it won contracts to provide software that helps manage plants in China and Thailand.

Earnings have slumped 8.4 percent on average for the 365 companies in the S&P 500 that have reported third-quarter results so far, according to Bloomberg data. Analysts expect full-year profits in the measure to fall 7.7 percent, estimates compiled by Bloomberg show.

Tenet, Dean Foods

Tenet Healthcare Corp. tumbled 37 percent to $2.61 for the biggest drop in the S&P 500. The operator of 55 hospitals in a dozen states lowered its 2008 profit forecast because of the slowing economy.

Dean Foods Co. slumped 18 percent to $18.25. The largest U.S. dairy processor reported third-quarter profit that fell short of the average analyst estimate.

Should either party have an edge in reviving the stock market, history suggests it is the Democrats.

Since 1928, the S&P 500 climbed 9.3 percent in the 12 months after the Democratic Party captured the White House, based on the median change following the election of six Democrats from Franklin D. Roosevelt to Bill Clinton.

Only once did the benchmark for American equities decline, after Jimmy Carter’s victory in 1976.

Among the six newly elected Republicans, five — including Herbert Hoover, Richard Nixon and George W. Bush — preceded stock-market declines, with a median retreat of 4.3 percent for the group, data compiled by Bloomberg show. The data excludes incumbents that won re-election.

Overall, the S&P 500 generated a median 62 percent advance from the time a Democrat is elected in November or elevated from the vice presidency until the next president is chosen. For Republicans, the gain is 28 percent.

As the Bush administration comes to a close, the S&P 500 has dropped farther and faster than any time since the presidency of Gerald Ford, losing 38 percent from an all-time high last year through yesterday.

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net.

Last Updated: November 4, 2008 17:12 EST