Election hopes boost Wall Street

The Dow jumped 300 points, raising hopes for a year-end rally.

WASHINGTON (AP) — The financial world looked hopefully ahead Tuesday to a new president who will confront an economy beset by a stubborn housing slump and the worst financial crisis in 70 years, which has caused consumers and businesses to sharply reduce their spending.

“He will inherit an economy that is in recession and ... is likely to get worse before it gets better,” said Stuart Hoffman, chief economist for PNC Financial Services.

Still, investors seemed to draw hope Tuesday from the selection of a new presidential administration, while shrugging off the latest in a series of grim economic reports.

The Dow Jones industrial average surged more than 300 points. The Dow and the other major stock indexes all finished with gains of more than 3 percent.

“Certainty is going to replace uncertainty,” said Ken Mayland, president of ClearView Economics, referring to the election results.

In another sign of the dismal economy, the Commerce Department said factory orders dropped 2.5 percent in September from August, more than three times as much as analysts had expected. Excluding autos and aircraft, orders fell 3.7 percent, the steepest drop since 1992, when the department began tracking sector-specific changes.

The weakness was led by a heavy drop in nondurable goods orders, which fell 5.5 percent.

That included a 17 percent drop in the value of petroleum and coal products, reflecting the decline in oil and gas prices in September.

Oil has fallen by more than half from its record level of $147 a barrel in July.

Analysts said the report wasn’t as bad as it looked, because much of the decline was driven by the drop in the value of oil and gas orders.

But orders for nondefense capital goods excluding aircraft, considered a good indication of business investment plans, fell 1.5 percent.

That follows a 2.3 percent drop in August and indicated companies are cutting back on their investments.

“Corporate America is buying into the recession story, and they are paring their investment spending accordingly,” Mayland said.

The factory orders report came a day before the release of the widely watched Institute of Supply Management gauge of activity in the U.S. services sector — including hotels, retail, health care and mining — for October.

That index is expected to fall, though not as steeply as its sister manufacturing index did Monday, when it dropped to its lowest level since the country’s last deep recession, the 1981-82 downturn.

The jump on Wall Street was the biggest Election Day rally for the Dow, topping the 1.2 percent gain seen in 1984 when Ronald Reagan defeated Walter Mondale. Prior to 1980, the market was closed on Election Day.

According to preliminary calculations, the Dow rose 305.45, or 3.28 percent, to 9,625.28.

The Dow last closed above 9,500 on Oct. 6, when it finished at 9,955.50.

Some analysts said the market rose on relief that the presidential election was about to be over.

But others said investors were anticipating a year-end recovery from Wall Street’s huge sell-off and were buying to be sure they didn’t miss out on its start.

“I seriously doubt it has much to do with the election, other than we’re all looking forward to it being over,” said independent investment strategist Edward Yardeni.

The fact that Wall Street is in the final stretch of a tough year is probably lifting stocks more than the elections, he said.

“It’s almost been a classic textbook crash in September and October followed by a year-end rally.”