Wall Street Cheers Bush Victory
Stocks finished broadly higher Wednesday as a decisive victory by George W. Bush in the presidential election eliminated an overhang of uncertainty on the market. However, the major indices came off session highs on an upturn in oil prices and profit-taking, notes Standard & Poor's MarketScope.
The Dow Jones industrial average climbed 101.32 points, or 1.01%, to finish at 10,103.21. The broader Standard & Poor's 500 index was up 12.62 points, or 1.12%, to 1,143.2. The Nasdaq composite index gained 19.54 points, or 0.98%, at 2,004.33.
In the energy markets, December NYMEX crude settled at $50.88 per barrel, up $1.26, after ranging between $48.65 and $51.10. Sellers took the lead following a much larger than expected weekly build in crude inventories, but the bulls came charging back once it became apparent President Bush had been re-elected, says Action Economics. The EIA reported a large 6.3 million barrel build in crude stocks, where the market had been looking for a 2.2 million barrel rise. Short covering dominated afternoon trade, says Action Economics.
Looking ahead to Thursday, economic reports will include third-quarter nonfarm productivity, which is expected to rise 1.1%. Compensation growth is expected to rise 3.5%, which implies a hefty 2.7% gain in unit labor costs. "While the data should confirm that the cyclical peak in productivity growth is behind us, it is our view that the strong secular uptrend that has been in place since the mid-1990s, remains intact," says Action Economics.
Also coming Thursday is the weekly update of first-time jobless claims.
Companies on Thursday's earnings calendar include Qwest Communications (Q ), Nvidia (NVDA ), CVS (CVS ), Devon Energy (DVN ), Hartford Financial (HIG ), and XM Satellite Radio (XMSR ).
On Wednesday, a key gauge of the service sector showed improvement. The October ISM services index rebounded to 59.8 in October, above the consensus forecast, from September's 56.7 level. Employment improved to 55.8 from 54.6. New orders climbed to 60.5 from 58.5. Prices paid surged to 74.1 from 67.1. This is a solid report, says Action Economics.
September factory orders fell 0.4% after a revised 0.3% decline in August (from -0.1%). Economists had expected orders to rise 0.4%, but the weakness is likely to be overlooked by the markets, says Action Economics.
In earnings news, Time Warner (TWX ) reported third-quarter earnings per share of 11 cents, vs. 12 cents a year ago, as items affecting comparability offset a 4.9% revenue rise. The media giant set $500 million in legal reserves related to pending government investigations, and said it will restate accounting for interests in AOL Europe prior to 2002.
Priceline.com (PCLN ) posted third-quarter earnings per share of 23 cents, vs. 21 cents a year ago (GAAP), as wider gross margin offset a 3% revenue decline. The online travel company sees fourth-quarter revenue growth of 5% to 10% and EPS of 5 cents to 9 cents.
InterActiveCorp (IACI ) posted third-quarter adjusted earnings per share of 24 cents, vs. 17 cents, on a 13% revenue rise (on a comparable net basis). The company sees 2004 operating income before amortization of about $1 billion and operating income of about $430 million. The stock rose.
Treasury prices finished higher, as the market recovered from early weakness. During the session, prices fell, sending yields sharply higher, as money moved into equities, and partly reflected sentiment that a second term for Bush would mean more swelling of fiscal deficits, says Standard & Poor's MarketScope.
Most bond traders are awaiting Friday's payrolls report to dictate the next chapter for the bond market, with a 3.98% to 4.20% range for the 10-year note yield seen in the interim, says Action Economics.
European stock markets finished higher on Wednesday. London's Financial Times-Stock Exchange 100 index was up 21.1 points, or 0.45%, to 4,714.3 as Britain's October services PMI jumped to 56.3 from 54.7 in September but employment fell to to 52.6 from 53.5. BAE Systems was lower as Britain's Serious Fraud Office begins an investigation of suspected false accounting.
Germany's DAX index gained 1.47 points, or 0.04%, to 4,039.04 as the Eurozone October services PMI rose to 53.5 from 53.3 in September with help from a rise in Germany. But German unemployment remained at five-year high 10.7% in October.
In Paris, the CAC 40 index rose 4.09 points, or 0.11%, to 3,769.93 as the French October Services PMI index rose to 54.8 from 53.1 in September.
Asian markets finished higher on Wednesday as news reports showed that market-favorite U.S. President George W. Bush would win re-election, says Standard & Poor's MarketScope. In Hong Kong, the Hang Seng index rose 88.93 points, or 0.67%, to close at 13,397.67, with gains seen across the board. Japan's stock market was closed for Culture Day.