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An Obama surge on Wall Street, and beyond?

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Did we just witness the Obama pre-victory rally?

The stock market today bucked convention with a sharp advance that lifted the Dow Jones industrials 305.45 points, or 3.3%, to 9,625.28.

That extended the Dow’s recovery from its 5 1/2-year closing low reached on Oct. 27 to 1,450 points, or 17.7%.

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Since stocks began trading on presidential election days in 1984 (before that, those days were market holidays) share prices have mostly moved little while awaiting the outcome. The average move in either direction has been less than 0.5%.

This time around, for whatever reason, some investors were in a buying mood for all sorts of assets they wouldn’t touch during the October meltdown -- including domestic stocks, foreign stocks (European blue-chip shares jumped 4.1%, on average) and commodities (oil futures soared $6.62 to $70.53 a barrel).

Whether today’s action had anything to do with the expected winner of the White House, Democratic Sen. Barack Obama, everyone is welcome to judge for themselves. We’ll have to presume that Obama wouldn’t want to get credit for the jump in oil prices, the biggest one-day rise since Sept. 22.

Many traders said there was a general sense of relief that the election was nearly over. But more important, they said, were fresh signs that credit markets were continuing to unclog, which at some point should bode better for the reeling economy.

One benchmark of banks’ cost of borrowing from each other -- the one-month London interbank offered rate, or Libor, for dollar loans -- fell to a four-year low of 2.18%, down from 2.36% on Monday.

The improvement in the credit markets at least offers hope that ‘things are clearing up’ in that part of the financial system, said Mike Mainwald, chief operating officer at Lek Securities Corp. in New York.

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Still, he said, the perception a month ago was that the global economy was sinking fast. In that respect, ‘The world hasn’t changed,’ he said. Obama -- or his Republican rival, John McCain, if he pulls off an upset -- will be walking into one gigantic economic and market mess.

As for Wall Street’s expectations for Obama, some market pros warn that investors may not be so sanguine on Wednesday, if the Democratic party gains enough seats in the Senate to bring its total to 60.

That would give Democrats a filibuster-proof majority against Republican opposition -- and raise fears of tax increases and other potentially investor-unfriendly moves beyond what Obama already has detailed.

‘I think there could be a bit of a shock on Wednesday, depending on how the makeup of the Senate breaks,’ said Fred Dickson, chief market strategist at brokerage D.A. Davidson & Co.

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