Election Day Proves Great For Stocks

With voters heading to the polls to elect the 44th President of the United States, stocks staged a strong rally. The Dow closed up 305 points, or 3.3%, to 9625. The S&P 500 crossed about 1,000 for the first time since October 13th, finishing up 39 points, or 4%, to 1,006. It was the largest election day rally since 1984.

Voters were out in force today, with reports from around the county showing long lines everywhere. It will likely be a record turnout.

Many expect an Obama win, and to some extent the market has already priced this possibility in. Today's rally could have been a 'sell the rumor of an Obama win, buy the fact of an Obama win'. Of course, as we all know, polls aren't always right. Should McCain miraculously pull out a victory, Wall Street may cheer this as his tax policy would likely be more favorable for investors.

Investors will also be interested in the voting in the Congress. If Democrats significantly increase their majority in the Senate and Congress, there will be fears that a left-wing agenda could spell trouble for public companies in Health Care, Pharmaceuticals, Tobacco, Defense and others industries.

Whoever wins, investors will be happy to put the election behind them and start working through the oncoming avalanche of negative economic data. The question is how much of this is priced in and when will stocks bottom out. Stocks will likely bottom 6-9 months before the economy bottoms, as it always looks ahead.

A number of quasi-financial companies were on the rise today on reports the U.S. Treasury will broaden the reach of the $700 billion TARP bailout plan: GE (NYSE: GE) rose 8%, CIT (NYSE: CIT) rose 36% and Principal Financial Group Inc. (NYSE: PFG) rose 23%.