U.S. Stocks Rise Ahead of Presidential Election Results
U.S. stocks rose, sending the Standard & Poor’s 500 Index higher for a second straight day, as American voters went to the polls to pick a president.
Hewlett-Packard Co. (HPQ) and United Technologies Corp. (UTX) added at least 2.6 percent to pace gains among the biggest companies. Computer Sciences Corp., the manager of networks for NASA, surged 17 percent as a cost-cutting program helped boost its profit forecast. Express Scripts (ESRX) Holding Co., the largest U.S. pharmacy benefits manager, plunged 12 percent after saying analysts’ profit estimates for 2013 were “overly aggressive.”
The S&P 500 rose 0.8 percent to 1,428.39 at 4 p.m. in New York. The Dow Jones Industrial Average added 133.24 points, or 1 percent, to 13,245.68. Volume for exchange-listed stocks in the U.S. was 5.9 billion shares, or about in line with the three- month average, according to data compiled by Bloomberg.
“We’re moving closer to a definition on the election front,” said Mark Luschini, who helps manage $54 billion as chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC. “It’s offering investors reason to say: we move from the unknown category regardless of the outcome.”
U.S. voters decide today between giving President Barack Obama another four years in office or replacing him with Republican challenger Mitt Romney. The next president will need to address a so-called fiscal cliff of more than $600 billion in tax increases and spending cuts that take effect in 2013 unless Congress can reach a budget compromise.
If history is any guide, today’s gain in stocks may be wiped out tomorrow. While the S&P 500 has risen an average 0.9 percent on presidential election days since 1984, the index had positive returns in only two of seven times on the following day, according to data compiled by Bespoke Investment Group. On average, the S&P 500 has declined 0.9 percent on the day after the polls, the data showed.
The options market is implying about a 2 percent move up or down in the S&P 500 over the next four trading days, according to Susquehanna Financial Group LLLP’s head of derivatives strategy Trevor Mottl. That’s equivalent to an even-odds range of 1,389 to 1,445 for the close on Nov. 9 based on options prices as of yesterday, he wrote today in a note to clients.
Nine out of 10 groups in the S&P 500 rose today as energy, financial and industrial shares gained more than 1 percent. The Morgan Stanley Cyclical Index of companies most-dependent on economic growth increased 1.5 percent to the highest level since March. Hewlett-Packard rallied 2.8 percent to $14.40. United Technologies added 2.7 percent to $79.97.
Computer Sciences (CSC) jumped 17 percent to $36.80. The company has cut jobs and worked to better manage its contracts, helping boost cash flow. Computer Sciences said today that it continues to reshuffle operations. That includes divesting “non-core assets such as a smaller business in Italy,” the company said.
Lam Research Corp. (LRCX) gained 2.3 percent to $37.69. The chip- equipment company was raised to positive from neutral at Susquehanna Financial Group by equity analyst Mehdi Hosseini. The 12-month share-price estimate is $48.
Express Scripts plunged 12 percent to $55.15. A “weak business climate and the unemployment outlook” may lead to a loss of members, depressed drug utilization and “increased client demands and expectations,” Express Scripts said in a statement.
Vivus Inc. (VVUS) slumped 21 percent to $11.82. The maker of the recently approved obesity drug Qsymia reported a larger third- quarter loss than analysts expected. The company told investors today that some patients are abandoning prescriptions at the pharmacy on discovering they must pay a large portion of the cost out-of-pocket, Andrew Berens, senior health-care analyst with Bloomberg Industries, said in a telephone interview.
Fossil Inc. (FOSL) tumbled 10 percent to $84.24. The maker of the namesake watch brand reported sales that trailed analysts’ estimates.
Zillow Inc. (Z) retreated 18 percent to $28.15. The operator of the largest real estate information website posted a record decline after forecasting fourth-quarter revenue that trailed analysts’ estimates.
The cost of health-care options jumped to a two-year high versus the rest of the U.S. equity market, pushed up by bets that a victory for Romney would endanger President Obama’s industry overhaul.
Implied volatility, a gauge of option prices, for contacts closest to the Health Care Select Sector SPDR Fund jumped 23 percent since hitting a low on Sept. 21 to 14.37 yesterday, according to three-month data compiled by Bloomberg. The measure reached its highest level since May 2010 relative to the SPDR S&P 500 ETF Trust two weeks ago. The U.S. exchange-traded fund, tracking companies such as Aetna Inc. (AET) and WellPoint Inc., has climbed 16 percent this year.
Romney has said he has the option of issuing waivers to states allowing them to get out of the Affordable Care Act’s requirements. The law, championed by Obama, is designed to expand insurance coverage to at least 30 million people. A repeal effort would confront hospitals and insurers that have already begun preparing for changes in the health-care system that mostly kick in by 2014.
The health-care ETF “will go up if Romney wins because the market considers him better for the sector,” Les Funtleyder, a fund manager focused on the health-care industry at New York- based Poliwogg, said yesterday in a phone interview. “If Obama wins, it’s going to be status quo.”
The Affordable Care Act marks the biggest change to the U.S. health system since Medicare and Medicaid were established in 1965. Romney said in June that he disagreed with the Supreme Court’s decision to uphold the constitutionality of the plan and that what the justices failed to do he would “do on my first day if elected president of the United States.”
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