An Obama surge on Wall Street, and beyond?

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%.

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.

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.

Photo: In a voting booth in Philadelphia (William Thomas Cain / Getty Images)

Comments

[rrgg]

Does this author know ANYTHING about the markets whatsoever? Today's price has to do with the end of uncertainty, not love for one party or the other.

[The Dude]

What is it with editorials under the banner of legit news?

[Stacy]

The stock market is not BOOMING because of Sentaor Obama. If anyone has been watching, as I do since I work for a financial advisor, the reason for the bounce back is because of McCain Numbers in the Polls rising. It has NOTHING to do with Obama. He is NOT THE SAINT the world HOPES FOR!

[Jake]

You're joking right? A rally for Obama? The Dow lost major points last week, gained back some this week and then it jumps 300 points and that's supposed to be some sign that a "not yet elected" Presidential candidate is having some effect on the Dow?

Get real ~ on the flip side, perhaps it truly is a rally before a crash, people trying to cash out as quickly as they can before they see their capital gains taxes increase at the end of the year. Who knows? It's the stock market - which is legitimize gambling in the first place and means very little about the "real health of the economy" and only fuels FEAR in the public.

[Jay]

As rrgg said "does this author know anything about the markets at all?"

3.3% is hardly a rally. Over the last few weeks you will find many more days with much larger movements, including one for 16%!!!

JC

[Tom Petruno]

I'll just invite recent commenters to read the entire blog post. It's not all that long, and it may even address some of your points.

Tom Petruno

[Miguel]

Whatever happened to responsible journalism? Geez. What a shameless gushing for Obama...like he's remotely responsible for a good day on Wall Street.

[Drake Mallard]

Obama is a sham candidate about whom we know very little other than he's a redistributionist, socialist--or close to it. His lousy resume (community organizer=rabble rouser) and secret college and medical records should make anyone suspicious. The media (except for the truth-telling, FOX News) are in the tank for this guy who's outspent McCain enough to buy the election.

Democrats hate Bush so much that they'd replace him with a lowlife like Obama--an old style, Chicago politician whose "Hope" and "Change" platform really means taxing success and increasing welfare. If Obama wins, it'll be a testament to how well he was able to smooth-talk the nitwits out there.

[Mr.Bilko]

Todays market closing has little to do with Barack Obama. Most of the hedge funds have finished selling stock to raise capital, deleverage and to cover their credit default swap positions. We're witnessing a Bear Market rally. Watch for a steep drop when Oct preliminaries start coming in. The closer gas gets to $2/gallon the less severe this recession will be since cheaper gas is like a hidden tax credit for most consumers.

[David]

Wow, you guys are just plain and simply so far left and liberal its disgusting. You consider a jump in Wall Street to be because of Obama? What in holy hell are you thinking? Please rid us of your bias and stupidity and become a real news source. Thanks.

[buz]

An Obama victory has been anticipated for some time now. But finally having the election over and some certainty about direction combined with some sense of calm in the Libor/credit storm gave buyers a reason to get back in.

[Rob Spooner]

I think the market over the past 2.5 months tracks fairly well with the fear that Sarah Palin might become VP. When it began to sink in that the public might support her enough to carry McCain, the market began to tank. As it has become clearer that she will go back to Alaska, it has recovered. With this now fully confirmed, I expect a further rally tomorrow.

Then a return to the bear market, which is a longer term phenomenon.

[Jamie]

Petruno's lead was 100% correct. This was an Obama rally. Anyone who does not understand that is ignorant of how the markets work.

[Shay]

So is today an Obama market collapse?

[Ron]

How's that Obama surge on wall street that you predicted working out?

[Tom Petruno]

Ron: From surge to purge.

Tom Petruno