Stocks broadly surge ahead of elections
NEW YORK » Wall Street roared back yesterday, erasing its losses of last week after private-equity buyout deals involving companies such as Four Seasons Hotels Inc. and OSI Restaurant Partners Inc. revived investors' belief that stocks still have room to run. The Dow Jones industrials shot up 119 points.
The gains came a day ahead of the U.S. midterm elections, though the prospect of a power shift in Congress didn't seem to unnerve investors.
"I think what you're seeing on the tape is a reflection of the amount of money that has been raised in the private equity pools and that money is starting to go to work," said John O'Donoghue, co-head of equities at Cowen & Co.
He also said investors are growing more confident that the elections will bring gridlock in Washington, a prospect Wall Street finds pleasing because it is seen as reducing risks to business interests.
The Dow rose 119.51, or 1.00 percent, to 12,105.55. The Dow moved back above the benchmark 12,000 level after closing below that Friday, when the blue chip average ended the week down 104.22 points. The Dow hadn't closed below that level since first finishing above 12,000 on Oct. 19.
Broader stock indicators also advanced yesterday. The Standard & Poor's 500 index was up 15.48, or 1.13 percent, at 1,379.78, and the Nasdaq composite index advanced 35.16, or 1.51 percent, to 2,365.95.
Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.70 percent from 4.71 percent late Friday. The dollar was mixed against other major currencies, while gold prices fell.
"I think it's a pretty broad-based rally," said Stephen Massocca, president of Pacific Growth Equities. "I think when you see things this strong it's a harbinger of things to come."
Investors shrugged off a moderate rise in crude prices. Last week, an increase in oil prompted by concern about attacks on facilities in Nigeria helped push stocks lower. While those fears receded after violence proved to be less widespread than expected, an OPEC official said yesterday that further production could be needed this year. Light, sweet crude was up 88 cents at $60.02 a barrel on the New York Mercantile Exchange.
Stocks rose sharply in October as investors sensed that corporate profits would hold up as the economy cooled. That notion lost backers last week, however, as negative economic data stirred fears the economy was slowing too quickly. Before yesterday's gain, when 28 of the 30 stocks that make up the Dow closed higher, the best-known market index closed lower for six straight sessions for the first time since June 2005.