Stocks Rally as Election Uncertainty Lifts

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In other U.S. markets Tuesday, the 10-year Treasury note was higher in price at 101-13/32 for a yield of 3.833%, while the 30-year bond was higher at 103-20/32 for a yield of 4.287%.

The dollar index was lower at 84.68 amid much speculation the Fed will follow lead of other central banks and lower rates soon to bolster the economy and help ease the financial crisis. The Australian dollar was up at 68.14 U.S cents although the Reserve Bank of Australia cut rate 75 basis points to 5.25% in a surprise move. The European Central Bank and the Bank of England are expected to cut their rates on Thursday. Reuters reported global currency movements were muted and liquidity was thin as traders awaited the outcome of the U.S. presidential vote.

December West Texas Intermediate crude oil futures settled $6.62 higher at $70.53 per barrel amid reports Saudi Arabia has cut crude supplies to some of its customers. Reuters said one industry source estimated Saudi Arabia had reduced exports, as opposed to production, by around 900,000 barrels per day from peak output in August. Producers are hopeful lower supply will boost prices, although a global economic slowdown is cutting down on demand. Some traders estimate the Saudis have cut shipments by around 900,000 barrels per day from the August peak, according to Reuters.

December gold futures settled up at $757.30 per ounce as the dollar index fell and oil futures rose. However, further gold price gains may be tempered ahead of potential interest rate cuts from the ECB and the BoE this week, according to Action Economics.

Joe Cusick, senior market analyst for optionsXpress in Chicago, says there may be some gains but he doesn't believe the exuberance can be sustained over the longer term.

"There’s too many challenges: we’ve seen dwindling bond yields, exploding dividend yields and shrinking [price-to-earnings] ratios. That isn’t the traditional recipe for a sustainable rally," he says. "You've got to keep your trading hats on."

Rather than buying stocks in any big quantities, he recommends gradually building up positions while paying attention to fundamental and technical factors and careful assessment of valuations.

Among other stocks in the news Tuesday, Archer-Daniels-Midland reported third-quarter earnings per share (EPS) of $1.63, vs. 68 cdents one year earlier, on a 65% sales rise.

Automatic Data Processing (ADP) reported third-quarter EPS of 54 cents, vs. 45 cents one year earlier, on 9.5% revenue growth. As a result of the worsening economic environment, the company anticipates total fiscal 2009 revenue growth of 2%-3% compared with its previous forecast of 7%-8%. However, ADP still thinks it can achieve its 10%-14% forecasted EPS from continuing operations growth, up from $2.18 in fiscal 2008 (excluding a gain).

Principal Financial Group (PFG) reported third-quarter operating EPS of 96 cents, vs. $1.18 one year earlier, on a 6.4% revenue decline. Wall Street was looking for about 92 cents.

Magna International (MGA) reported a third-quarter loss per share of $1.93, vs. $1.38 EPS one year earlier, on a 9% revenue drop. The company significantly reduced expectations for 2008 light vehicle production volumes in North America; it now sees light vehicle production volumes of about 12.8 million units in North America and about 14.9 million units in Europe. Magna expects consolidated sales to be between $23.2 billion-$24.3 billion for 2008. It sees 20908 complete vehicle assembly sales of $3.25 billion-$3.45 billion.

Marvel Entertainemnt (MVL) posted third-quarter EPS of 64 cents, vs. 45 cents one yera earlier, on a 48% sales rise. The company raised its $450 million-$480 million 2008 sales guidance to $640 million-$670 million and its $1.55-$1.75 EPS guidance to $2.45-$2.65 to reflect third-quarter recognition and expected fourth-quarter recognition of substantial box office and DVD revenues from Marvel's Iron Man feature film and modestly improved expectations for its licensing business. Marvel set 2009 guidance of $415 million-$460 million in sales and $1.00-$1.35 EPS. Wall Street is looking for $1.94.

Jacobs Engineering Group (JEC) reported fourth-quarter EPS of 92 cents, vs. 68 cents one year earlier, on 40% higher revenues. The company sees $3.55-$4.05 fiscal 2009 EPS.

Boeing Co. (BA) says world air cargo growth will expand at a 5.8% annual rate over the next two decades, with worldwide air freight traffic tripling through 2027, according to the company's World Air Cargo Forecast 2008/2009.