Markets higher following election

Wall Street rose for a third straight session Wednesday, with the Dow Jones industrials 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 showed gains following the announcement that Defense Secretary Donald H. Rumsfeld will resign.

Some investors saw “headline risk” from Wednesday’s news but expect that Wall Street will quickly get back to business.

“I would think over the next several weeks that investors should return their focus to the likelihood for interest rate moves in the decelerating economic climate, the moderating earnings growth and the weakening housing market,” said Elizabeth Weymouth, global investment specialist at JPMorgan Private Bank.

The Dow rose 19.77, or 0.16 percent, to 12,176.54. The blue chips closed above the record of 12,167.02 set on Oct. 26 and came within a few points of a record trading high of 12,196.32 reached Tuesday.

Broader stock indicators also advanced. The Standard & Poor’s 500 index was up 2.88, or 0.21 percent, at 1,385.72, and the Nasdaq composite index rose 9.06, or 0.38 percent, to 2,384.94.

Bonds rose, with the yield on the benchmark 10-year Treasury falling to 4.64 percent from 4.66 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude rose 90 cents to $59.83 on the New York Mercantile Exchange after the Energy Department reported domestic crude inventories rose last week but that gasoline stores fell.

The gains this week continue a run-up seen in October that was interrupted last week when a string of poor economic data sent stocks lower. Already this week the major indexes are up at least 1.5 percent and have offset last week’s losses. While Wall Street wants an economic slowdown to ease inflation and persuade the Federal Reserve to lower short-term interest rates, investors grew concerned last week that perhaps the economy was cooling too quickly and would fall into a recession. A series of private equity buyout deals lifted spirits Monday as have some better-than-expected profit reports.

Looking at the ramifications of the election, Weymouth said that while gridlock could again become a fixture in Washington, she said investors will likely still consider whether Democrats might make an effort to somehow cap prescription drug prices, increase the federal minimum wage or raise the 15 percent tax on some dividend gains.

Subodh Kumar, chief investment strategist for CIBC World Markets, contends that while energy stocks, for example, might have been expected to see pressure amid concerns about windfall profit taxes, the overall mood on Wall Street is positive.

“One of the interesting things to look at it is that bond yields have been relatively stable and the dollar has been moving up. I think one can look at that as anticipation that reduction of budget deficits will be a higher priorities in Washington,” he said.

Advancing issues outnumbered decliners by about 5-to-3 on the New York Stock Exchange, where volume came to 1.69 billion shares compared with 1.61 billion traded Tuesday.

The Russell 2000 index of smaller companies was up 5.45, or 0.71 percent, at 769.84.

Overseas, Japan’s Nikkei stock average closed down 1.08 percent. Britain’s FTSE 100 closed down 0.08 percent, Germany’s DAX index was down 0.20 percent, and France’s CAC-40 was down 0.01 percent.