NEW YORK (AFP) - The re-election of President George W. Bush may lift Wall Street out of its rut, with sectors like pharmaceuticals, defense and oil expected to rally, but any follow-through depends on economic strength, analysts said.
Wall Street rallied even before the news that Senator John Kerry had conceded the election, after results appeared tipped to Bush. The dollar, which weakened amid the uncertainty, appeared heading slightly higher.
"We believe the market is likely to experience a near-term relief rally, as a result of the likely quick resolution to the election, and the absence of a repeat of 'Election 2000,'" said Sam Stovall, chief investment strategist at Standard and Poor's.
"The bottom line is that the pro-business candidate appears to have won," said Merrill Lynch economist David Rosenberg.
"Perhaps how investors should be looking at the situation is to consider what was likely avoided with a Kerry defeat -- basically, a potential return to a more regulated policy environment."
"The conventional wisdom holds that Bush is better for stocks than Kerry would have been," said Vince Boberski, market strategist at RBC Dain Rauscher.
The analyst said Bush may find it easier to win passage of his legislative programs with a stronger majority in the new Congress.
"The Republicans have also solidified their majorities in both houses of Congress," he said.
"That, coupled with a decisive majority in the popular vote, likely gives the president something more of a mandate than we would have expected -- making passage of his major initiatives such as making income tax rate cuts more likely than not."
With the market stuck in a rut for the past nine months, some analysts say the Bush victory could be a catalyst for a rally.
"As the market had not discounted a Bush victory, we will probably have a couple of days of celebration," said Alfred Goldman at AG Edwards.
"Also, the election news is coming into a market that is reasonably priced overall and where the mood is cautious -- that's a positive environment."
Some sectors were already rallying as the news of the Kerry concession was received, including defense groups including Boeing, United Technologies and Lockheed Martin, pharmaceutical companies Pfizer, Bristol-Myers and Merck and oil giants ExxonMobil, ChevronTexaco and ConocoPhillips.
"With respect to the environment and emission standards, the election results is likely to be positive for everything from utilities to coal producers to heavy manufacturers to autos," Rosenberg said.
"With respect to drug pricing, the election results is likely to be constructive for the pharmaceutical sector.
Stovall at S and P said the broad-market S and P 500 index, which closed at 1130 on Tuesday "will meet, and possibly exceed, our Investment Policy Committee's year-end target of 1150."
S and P said he sees the market rebounding in areas that could have been hurt by a Kerry victory, including pharmaceuticals, health care, textile makers and importers and tech companies with a significant offshore presence.
"What's more, defense contractors, energy companies and selected financial firms are likely to experience a firming of their share prices," Stovall said.
But Stovall said the market needs a solid fundamental economic backdrop and that poses a challenge to the Bush administration in the face of high deficits and other issues.
"Once the relief rally has run its course," he said, "the fundamental backdrop will reassert itself. The budget deficit remains the largest in history and likely precludes additional fiscal stimulus. In addition, S and P sees the value of the US dollar continuing its slide in response to the enormous trade deficit."
Rosenberg noted that Kerry's proposal to boost the minimum wage to seven dollars an hour -- opposed by retailers hiring low-wage workers -- appears unlikely and that a tax hike proposed by Kerry on individuals making over 200,000 dollars a year is also likely dead.
Such a plan "would hardly have been bullish for high-end retailers," Rosenberg said, adding that Bush may be positive for the finance sector by resisting any plan to repeal dividend and capital gains tax reductions.

11/03/2004 - 17:51 GMT - AFP