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

``This is a clear indication that the market is much happier with Bush being re-elected than with Kerry moving to the White House,'' said Joseph Keating, who oversees $25 billion as chief investment officer at AmSouth Bancorp in Birmingham, Alabama. ``The outlook for the economy is better if we're not looking at the potential for tax increases than if Kerry were elected.''

Drugmakers such as Pfizer Inc. led the gains. Oil and gas producers and stocks that pay above-average dividends also rose. Kerry had pledged to expand production of generic drugs, look for alternative energy resources and reverse Bush's dividend-tax cut.

The Standard & Poor's 500 Index climbed 16.09, or 1.4 percent, to 1146.63 as of 11:28 a.m. in New York, with all 24 industry groups advancing. The benchmark headed toward a seventh day of gains.

The Dow Jones Industrial Average jumped 147.11, or 1.5 percent, to 10,182.84, rebounding from a drop yesterday that was fueled by speculation Kerry was leading in some battleground states. The Nasdaq Composite Index rose 30.91, or 1.6 percent, to 2015.70.

More than 10 stocks advanced for every three that declined on the New York Stock Exchange. Some 703.3 million shares changed hands on the Big Board, 22 percent more than the same time a week ago.

Economic Growth

The U.S. economy is expected to grow 3.6 percent in 2005, according to the median forecast of 61 economists surveyed by Bloomberg News last month. The economy expanded 3.9 percent during the 12 months that ended in September.

Profit among companies in the S&P 500 is expected to grow an average 10.6 percent next year, faster than the 7 percent average over the past 50 years, according to Thomson Financial.

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.

The health-care industry ``will be one of those sectors that does well through year-end,'' said Bob Sitko, who helps manage $400 million at USAA Private Investment Management in San Antonio. ``Kerry would've taken more draconian steps towards price controls in one form or another.''

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 Shares

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.

The Dow Jones Select Dividend Index, a measure of 50 stocks that provide above-average payouts, climbed 1.7 percent. Kerry had pledged to roll back Bush's dividend-tax reduction. People's Bank, which pays a dividend equal to 3 percent of its share price, rallied $1.45 to $38.45.

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

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.

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.

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 3.1 percent in 2004.

Companies facing asbestos-related claims rose on expectations the defeat of Senate Democratic Leader Tom Daschle would pave the way for a less-costly trust fund for asbestos victims. W.R. Grace & Co. added $1.63 to $12.22. Georgia-Pacific Corp. increased 80 cents to $35.33.

Shares of home health-care suppliers climbed after the government's Medicare program said it will raise reimbursements for respiratory medicines. Lincare Holdings Inc. added $1.35 to $44.69. Apria Healthcare Group Inc. climbed 98 cents to $28.47.

Internet Companies

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 survey.

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, shed 94 cents to $20.01 after saying third-quarter sales unexpectedly dropped. Sales fell to $235.9 million, lower than the average estimate of $251.1 million in a Thomson poll.

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

Last Updated: November 3, 2004 11:30 EST