Nov. 3 (Bloomberg) -- U.S. stocks rallied as President George W. Bush was poised to defeat Senator John Kerry for a second term, spurring confidence for sustained growth in the economy and corporate earnings.

``Having the incumbent stay in office will give us a bounce,'' said Walter Todd, who helps manage $1 billion at Greenwood Capital Associates in Greenwood, South Carolina. ``The election has had people on the sidelines.''

Drugmakers such as Pfizer Inc. and Merck & Co. led the advance. Kerry had pledged to reduce government spending on pharmaceuticals by expanding production of generic drugs and allowing cheaper imports.

The Standard & Poor's 500 Index climbed 13.25, or 1.2 percent, to 1143.79 as of 10:15 a.m. in New York, heading toward a seventh day of gains. The Dow Jones Industrial Average jumped 124.77, or 1.2 percent, to 10,160.50 and the Nasdaq Composite Index rose 22.20, or 1.1 percent, to 2006.99.

More than four stocks advanced for every one that declined on the New York Stock Exchange. Some 310.8 million shares changed hands on the Big Board, 58 percent more than the same time a week ago.

European markets also gained on expectations of a second Bush term, with the Dow Jones Stoxx 50 Index rising 0.7 percent. Crude oil futures had their biggest jump in three days after falling on concern about a Kerry victory. The Senator had criticized Bush during the campaign for filling the Strategic Petroleum Reserve at a time of high prices.

Bush leads in a race that hinges on the outcome in Ohio, which has 20 electoral votes. With 99.9 percent of the state's precincts reporting, Bush led by 134,019 votes, according to the Ohio secretary of state's office.

`Statistically Insurmountable'

White House Chief of Staff Andrew Card said Bush's lead in Ohio is ``statistically insurmountable.'' Bush has 254 of the 270 Electoral College votes needed to capture the election, while the Senator garnered 252. Kerry campaign officials estimated there are as many as 250,000 provisional ballots in the state that still need to be counted.

Martin Schulz, who manages $800 million at National City Investment Management in Cleveland, said he hoped Kerry ``will do the global markets a favor by conceding defeat.''

Pharmaceutical stocks as a group accounted for a quarter of the S&P 500's advance. They climbed 4.1 percent. Pfizer, the world's biggest drugmaker, added $1.69 to $30.39. Merck rose 80 cents to $27.60.

``Pharma probably would have suffered more under Kerry,'' said John Velis, global equity strategist at HSBC Securities Inc. in London. ``You could expect a stronger relief rally in the drug industry than in other sectors.''

Stem-Cell Research

Companies that develop treatments based on stem cells that may have received government funding under Kerry slumped. StemCells Inc. dropped 64 cents to $3.47. Geron Corp. slumped 68 cents to $7.25.

Energy companies advanced. Apache Corp., an oil and natural- gas company, rose 78 cents to $50.24. Devon Energy Corp., an Oklahoma City-based oil and natural-gas producer, gained $1.11 to $73.96.

Halliburton Co., the world's largest oilfield-services company, rose $2.05 to $37.59. The company, which U.S. Vice President Dick Cheney headed from 1995 to 2000, is the center of a Federal Bureau of Investigation probe into whether the company was given preferential treatment to win contracts in Iraq.

Defense contractors rose on optimism a Republican-led government will sustain spending in military equipment. Lockheed Martin Corp., the largest U.S. defense company, gained $1.61 to $55.72. Raytheon Co., the world's largest missile maker, added $1.19 to $37.95.

Shares of Internet companies advanced after IAC/InterActiveCorp, the owner of travel web sites Hotels.com and Hotwire.com, reported earnings that exceeded analyst estimates.

IAC/InterActiveCorp jumped $1.87 to $23.87. Profit excluding some costs was 24 cents a share, beating the 21-cent average analyst estimate in a Thomson Financial survey.

Yahoo

Yahoo! Inc., owner of the world's second-most-used Internet search engine, gained $1.01 to $38.75. EBay Inc., the largest Internet auctioneer, rose $1.50 to $102.16.

Time Warner Inc. gained 30 cents to $16.58. The media company said third-quarter profit fell to 11 cents a share from 12 cents a year earlier. The company also said it set aside $500 million to resolve inquiries by U.S. regulators and the Department of Justice into advertising agreements that its America Online unit struck in 2001 and 2002.

Hovnanian Enterprises Inc. slipped 58 cents to $38.09. The biggest homebuilder in New Jersey said it expects fiscal 2004 profit of $5.30 a share as rain in southern California delayed delivery of some homes. The company had previously forecast profit exceeding $5.30.

Priceline.com Inc., a seller of discount-travel services, dropped 94 cents to $20.01 after saying third-quarter sales unexpectedly declined. Sales fell to $235.9 million, lower than the average estimate of $251.1 million in Thomson's survey of analysts.

The S&P 500 has gained the past six days, its longest steak since May 27, in anticipation the presidential election would produce a clear winner and as crude oil prices retreated from a record.

In the 13 presidential election years since 1952, the S&P 500 gained an average of 6 percent in the last two months of the year, according to a report by UBS AG. The index has climbed 1.7 percent in 2004.

To contact the reporters on this story: Edgar Ortega in New York at ebarrales@bloomberg.net.

Last Updated: November 3, 2004 10:16 EST