Published On: Wed, Nov 7th, 2012

US Stocks Enjoy Election Day Rise

On Tuesday night, investors began buying up stock in the United States. The Dow Jones industrial average gained by 133.24 points, or one percent, to end at 13,245.68. This advance was led by industrial stock and energy shares. United Technologies Corporation rose $2.07 or 2.7 percent to end at $79.97 while Hewlett-Packard Corporation shares increased by $0.39, or 2.8 percent, to $14.40. Shares in Boeing Corporation rose 2.3 percent, or $1.61, to reach $72.02.

Since 1896, the Dow Jones industrial average has increased by an average of 0.8 percent on Election Days. On the following day, it has average a rise of 0.1 percent. The only sector that dropped on Tuesday was telecommunication stocks. Stock in AT&T Incorporated fell by three cents or 0.1 percent to $34.80.Many investors said that stock prices would rise in the short term no matter who was elected president. Uncertainty often causes an increase in stock volatility. Once a president is clearly decided, it will boost share prices temporarily. The Standard & Poor’s 500 index also gained by 11.13 points during the day. It rose 0.8 percent to end at 1428.39. The Nasdaq Composite index increased by 12.27 points, or 0.4 percent, to finish out at 3011.93.

In Europe, the Stoxx Europe 600 has increased for three of the last four days of trading. It rose 0.6 percent yesterday. The French CAC-40 rose by 0.9 percent while the German DAX index advanced by 0.7 percent.

Unlike the stock markets in Europe and the United States, Asian markets mostly finished out the day lower. On Thursday, China’s Communist Party Congress is set to begin. This day will mark a once-in-a-decade change in leadership for China. Uncertainty around the changeover led the Japanese Nikkei stock average and the Chinese Shanghai Composite to fall 0.4 percent.

At the same time, crude oil prices increased by 3.6 percent per barrel to end at $88.71 while gold rose 1.9 percent to a value of $1,714.10 an ounce. The euro gained versus the dollar while the greenback advanced against the Japanese yen. In the United States, ten-year Treasury bonds increased to 1.742 percent.

Corporate News

The operator of stock markets in Europe and the New York Stock exchange, NYSE Euronext, lost 5.2 percent or $1.34. It reported a larger drop in third-quarter revenue than expected before it finished out the trading session at $24.27 per share.

Zillow Incorporated also reported third-quarter revenue that was lower than expected. The real-estate information corporation dropped its forecast for the fourth quarter as well. Shares in Zillow fell by 18 percent, or $6.22, to end at $28.15. Zillow has reported that they will be buying Mortech for a price of $12 million. Zillow is also expected to purchase 150,000 shares of restricted stock in Mortech.

Fossil Incorporated shares dropped 11 percent, or $9.86. The fashion retailer showed third-quarter revenue that was lower than expected and forecasted a decrease in sales for the fourth quarter. This drop was mostly attributed to a decline in European wholesale business. At the end of the day, shares in Fossil Incorporated stood at $84.24.

Shares of AOL Incorporated rose by 22 percent after their third-quarter revenue held steady. This was the first time in seven years that AOL has not posted a decline in revenue. Shares prices advanced by $7.89 to $43.70.

Express Scripts Holding Company saw its share prices fall by $7.73, or 12 percent, on Tuesday. The pharmacy-benefit manager had a third-quarter revenue that was lower than forecasted. Coupled with a lowered forecast for 2013, this negative news caused share prices to tumble to $55.15.

The popular weight-loss product distributor, Medifast Incorporated, saw its share prices gain by $2.29. Shares in Medifast rose by 8.5 percent to end at $29.11. Medifast reported higher third-quarter earnings and a favorable forecast for the upcoming year.

Presidential Race

As results pour in, it appears that President Obama will retain his position for another term. For the markets, this means an extension of the status quo. President Obama will have to carefully navigate budget cuts and spending measures for the upcoming year. For some, the results of this election came as a relief. Federal Reserve Chief Ben Bernanke’s term ends on January 2014. Forex traders were concerned about the possibility of his retention under a Romney presidency. Former Governor Romney has been consistently critical of the Federal Reserve’s quantitative easing measures and low interest rates. If he had been elected, many investors had expected Romney to deny Ben Bernanke a renewal of his contract. The likely victory of Obama ensures that Bernanke will remain at the Federal Reserve and the United States will maintain its current trajectory in the recovery process.
Asian Markets

In Hong Kong, the Hang Seng dropped by 0.4 percent to end at 21,867.67. The Japanese Nikkei 225 index bounced between advances and losses. It ultimately ended the day 0.1 percent to 8,979.30. The Kospi in South Korea decreased by 0.2 percent to finish at 1,924.23. Across the board, benchmarks in the Philippines, Malaysia and mainland China ended the day at lower levels.

In Indonesia, Taiwan and New Zealand, benchmarks gained for the day. The Australian S&P/ASX200 advanced by 0.3 percent to finish at 4,498.40.

Around the world, investors are warily watching developments in Europe. Greece is poised to adopt further austerity measures. If they want to continue to receive bailout funds, Greek politicians must stop wavering over spending cuts and adopt the policies of their creditors. Without such measures, Greece will no longer receive bailout funds and could go bankrupt by the end of this month. If this happens, there is a higher likelihood that the debt ridden nation will leave the euro.

Toronto Stocks Remain the Same

The S&P/TSX composite index in Canada barely advanced on Tuesday by 8.42 points. It ended the day at 12,361.2. Investors were cautious about making major changes as they awaited the end of the United States presidential election. Versus the greenback, the Canadian dollar advanced by 0.005 to end at $1.0083.Overall, the mining and metals sector of the TSX rose by 0.9 percent. Copper increased by four cents to end at $3.51 United States dollars per pound.

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About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.