Stocks surge as investors anticipate yearend rally

Source: Agencies  |   2008-11-5  |     ONLINE EDITION

INVESTORS believing that Wall Street is on the verge of a yearend rally piled into the market yesterday, brushing off more weak economic data while they scarfed up stocks and propelled the Dow Jones industrials up 300 points to its highest close in four weeks.

It was the biggest Election Day rally ever for the Dow, which rose 3.28 percent and topped the 1.2 percent gain seen in 1984 when Ronald Reagan defeated Walter Mondale. Prior to 1980, the market was closed on Election Day.

Broader market indexes were also up more than 3 percent yesterday.

Some analysts said the market rose on relief that the presidential election was about to be decided. But others said investors were anticipating a year-end recovery from Wall Street's huge sell-off and bought 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."

Steven Goldman, chief market strategist at Weeden & Co, said, "historically, we were at the most oversold levels since October 1974."

"We've come to levels that would tend to discount a lot of bad news," he said.

There's still a feeling the market might fall back and retest the trading lows reached October 10 before entering a true bull market. But it's possible that the retrenchment won't happen until 2009, in similar oversold markets in 1974 and 2002, Goldman said, the return to the lows of the bear market did not happen until two months later.