- The Washington Times - Wednesday, November 8, 2006

From combined dispatches

Wall Street rose for a third straight session yesterday, with the Dow Jones Industrial Average reaching another record close as investors grew more confident that a huge victory by Democrats in congressional elections would result in gridlock and keep lawmakers out of the way of business interests.

The market had largely expected Democrats to gain control of the House of Representatives, but an undecided Senate race in Virginia had, during early trading, unnerved investors, who dislike such uncertainty. Stocks gained after the announcement that Defense Secretary Donald H. Rumsfeld will resign.

Exxon Mobil Corp. led the Dow as rising crude prices lifted energy producers. Archer Daniels Midland Co. had its steepest gain in six months on speculation that Democrats may expand subsidies for ethanol.

Geron Corp. and other stem-cell researchers climbed on the prospect that the Democratic victories will lead to increased funding. The defeat of a proposed cigarette tax in California boosted Altria Group Inc. and Reynolds American Inc., the two largest U.S. tobacco companies.

“Investors are focused on sectors that will be helped and hurt by the elections,” said Frederic Dickson of D.A. Davidson & Co. “We’ll see more fiscal responsibility in Washington and an opportunity to achieve some bipartisanship.”

The Dow climbed 19.77, or 0.2 percent, to 12,176.54, eclipsing the closing high of 12,163.66 on Oct. 26. The Standard & Poor’s 500 Index added 2.88, or 0.2 percent, to 1385.72.

The Nasdaq Composite Index rose 9.06, or 0.4 percent, to 2384.94, a level not seen since Feb. 16, 2001.

The Russell 2000 Index of smaller companies increased 0.7 percent to 769.84.

Health care shares declined, led by Merck & Co. Inc. and Humana Inc., on concern that Democrats may push for an agenda that cuts government payments for drugs and medical insurance. Defense companies dropped amid fears that Democrats would reduce military spending and as Secretary of Defense Donald H. Rumsfeld resigned.

Some investors said a divided government would prevent either party from controlling the economic agenda, clearing the way for corporate earnings and economic data to influence shares.

“A stalemate between the president and the Congress is usually a fairly bullish thing,” said Barton Biggs of Traxis Partners. “The fundamentals are what’s going to drive this market, not the political events that just happened.”

Energy shares climbed 1.8 percent for the best performance among 10 industry groups in the S&P; 500. The group also gained after voters in California, the most populous state, rejected a tax on oil to spur the development and adoption of clean energy technologies.

Exxon rose $1.60 to a record $74.13. Chevron Corp., the lead contributor to the $95 million campaign to defeat the tax, added 60 cents to $69.51.

Crude oil for December delivery climbed 1.5 percent to $59.83 a barrel in New York after a government report showed that U.S. diesel inventories fell for a fourth week.

Archer Daniels jumped $2.20 to $35.73 amid speculation that Democrats may boost demand for ethanol, a fuel made mostly from corn. The 6.6 percent increase was the biggest in the S&P; 500 and the stock’s best advance since May 2.

Stem-cell companies climbed. Geron, the developer of cancer treatments based on an enzyme that may inhibit cell growth, surged 28 cents to $8.66. StemCells Inc. soared 32 cents to $3.39. Advanced Cell Technology Inc. rose 11 cents to 92 cents.

Tobacco shares advanced after California voters rejected a ballot measure that would have more than quadrupled the cigarette tax to fund health care services. Altria, the parent of Richmond-based Philip Morris, gained $1.12 to $81.45. Reynolds increased $1.13 to $64.53.

Two stocks gained for every one that dropped on the New York Stock Exchange. About 1.70 billion shares changed hands on the Big Board, 11 percent more than the three-month daily average.

Drugmakers, as well as health care equipment and services companies, were the biggest drags on the S&P; 500 among its two dozen industry groups. The measures fell 1.5 percent and 1.7 percent, respectively, on concern that Democrats may champion curbing Medicare drug prices.

Merck retreated $1.56 to $44.34 after saying it may have to pay $3.8 billion to the Internal Revenue Service in back taxes. The amount is about $1.5 billion more than Merck previously reported.

Pfizer Inc. fell 43 cents to $26.62. Humana, the second-biggest provider of Medicare drug benefits, lost $3.46 to $55.19.

“There is a perception that the Democrats would be more proactive in controlling drug prices and make available to senior citizens cheaper drugs from Canada,” said Eric Thorne of Bryn Mawr Trust. “It’s a good idea to be a little bit light in the health care sector.”

Lockheed Martin Corp. of Bethesda, the world’s largest defense contractor, fell $1.04 to $86.45. General Dynamics Corp. of Falls Church, the biggest maker of armored vehicles for the U.S. military, slid $1.51 to $70.49.

Mortgage companies advanced because Democrats have opposed stricter regulation of the lenders. District-based Fannie Mae, the largest U.S. mortgage finance company, advanced $1.75 to $61.65. Smaller competitor Freddie Mac, of McLean, added $1.37 to $71.23.

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