Best election day rally since 1984 as energy soars 10%
Small-cap stocks pushed higher on election day, lifted by strong commodity and financial stocks and relief that a long, yet historic political campaign was about over. The Russell 2000 (NYSE:IWM) closed up 7.47, or 1.39% at 545.97, the sixth consecutive daily gain, something that hasn’t happened all year. For 2008, the Russell is down 29%, while the Dow is off 27% and the S&P 500 is down 31%.
Today’s rally clearly favored large caps as investors still have a tinge of risk aversion that tends to favor bigger companies. Also, the rally in energy stocks had a more powerful influence on large caps as many energy companies have sizable market caps. For large caps, it ranked as the biggest election day rally since 1984 when incumbent Ronald Reagan carried 49 of 50 states, with runner-up Walter Mondale carrying only his home state of Minnesota and the District of Columbia.
Within the energy arena, the Energy Select Sector SPDR Fund jumped 6.3%, mirroring a big surge in crude oil prices. Crude gushed 10% on talk that Saudi Arabia was slashing production. In addition, commodities like crude oil benefited from a sizable slide in the U.S. dollar, which makes dollar-priced goods more attractive. The greenback tumbled more than 300 basis points, or some 2.4% against the euro, triggering a buying spree in all sorts of commodity goods.
The Commodity Research Bureau Index of 19 physical markets shot 5.3% higher today, with gains seen in everything from gold, sugar, coffee, grains, cattle and copper. The latter is seen as a key economic benchmark and copper prices jumped 6.4% in U.S. trading. In addition to the macro trends on the dollar, strong earnings for soybean processor Archer Daniels Midland Co. (NYSE:ADM) fueled a supportive tone for beaten down commodity stocks. ADM shares rallied some 14%.
Financial shares also were a big part of the story today, with the Financial Select Sector SPDR Fund up 5%, boosted by yet another decline for inter-bank lending . . .
Today’s rally clearly favored large caps as investors still have a tinge of risk aversion that tends to favor bigger companies. Also, the rally in energy stocks had a more powerful influence on large caps as many energy companies have sizable market caps. For large caps, it ranked as the biggest election day rally since 1984 when incumbent Ronald Reagan carried 49 of 50 states, with runner-up Walter Mondale carrying only his home state of Minnesota and the District of Columbia.
Within the energy arena, the Energy Select Sector SPDR Fund jumped 6.3%, mirroring a big surge in crude oil prices. Crude gushed 10% on talk that Saudi Arabia was slashing production. In addition, commodities like crude oil benefited from a sizable slide in the U.S. dollar, which makes dollar-priced goods more attractive. The greenback tumbled more than 300 basis points, or some 2.4% against the euro, triggering a buying spree in all sorts of commodity goods.
The Commodity Research Bureau Index of 19 physical markets shot 5.3% higher today, with gains seen in everything from gold, sugar, coffee, grains, cattle and copper. The latter is seen as a key economic benchmark and copper prices jumped 6.4% in U.S. trading. In addition to the macro trends on the dollar, strong earnings for soybean processor Archer Daniels Midland Co. (NYSE:ADM) fueled a supportive tone for beaten down commodity stocks. ADM shares rallied some 14%.
Financial shares also were a big part of the story today, with the Financial Select Sector SPDR Fund up 5%, boosted by yet another decline for inter-bank lending . . .
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About the Author
Kevin Pendley covers the Russell 2000 index for SmallCapInvestor.com and writes a weekly technical analysis column.