Bush win seen lifting drug, defense, oil, coal stocksPublished by MAC on 2004-11-05
Bush win seen lifting drug, defense, oil, coal stocks
Story by Arindam Nag, Planet Ark
November 5, 2004
New York - It was a big bonanza this week for stocks seen benefiting most from a second term for President George W. Bush.
Winners included big oil companies, drillers and coal companies, which rode higher on confidence of four more years of Bush's fossil-fuel-friendly policies.
The Bush victory also boosted defense companies, which are expected to continue to benefit from the costly war in Iraq, which began in March 2003.
Pharmaceutical investors were encouraged by the prospect of the Bush win reducing the threat of government-imposed price cuts and pushed shares of drug stocks higher.
Utilities stocks rallied on the prospect that the president's dividend tax cut will be preserved. Gas and electric companies typically pay higher dividends.
On the downside, however, stocks seen most aligned to policies favored by Sen. John Kerry had a hard day as the Massachusetts Democrat conceded the race to Bush.
Those included a handful of biotechnology stocks focused on stem cell research, alternative energy companies and the government-backed mortgage finance companies Fannie Mae and Freddie Mac.
The combined muscle of Bush-friendly stocks boosted the Dow Jones industrial average more than 101 points, or just over 1 percent, to a close of 10,137.05.
"I expect this rally to stay at least in the short term, at least for a couple of weeks," said Som Dasgupta, head of equities trading, PNC Corporate Bank in Pittsburgh. "After that it depends on what President Bush says about fiscal policy going forward and how the market interprets what he says on the budget deficit."
The impact of the Bush victory was particularly felt in the pharma sector worldwide. For most global companies in this industry, the United States is still the biggest market and a Republican win reduces the risk of cut-price drug reimportation from Canada, industry analysts said.
"A Bush win will drive a relief rally in the (drug) sector," ABN Amro wrote in a note to clients. Pfizer rose nearly 3 percent to $29.50 while Bristol Myers Squibb rose 2.5 percent.
The oil industry is expected to benefit from Bush's ambition to increase America's own sources of oil.
"The Bush White House believes that high commodity prices would direct investment flow to supply and distribution infrastructure," said James Lucier, an energy policy analyst at Prudential Equity Group, earlier this week.
The defense sector rally was led by Boeing Co. Raytheon Co and Lockheed Martin Corp. Along with a couple of others, these three companies make the updated version of the "Star Wars" anti-missile defense system which Bush supports. Kerry had said he would slash the program.
"We expect defense spending trends to remain roughly unchanged, with risks of curtailed spending on missile defense much lower than before the election," said Jared Muroff, an analyst with Prudential Equity Group.
The banking sector took warmth on speculation that the administration would continue with current fiscal policies and would ease regulatory pressure on Wall Street.
That helped send shares of No. 2 U.S. bank J.P. Morgan Chase & Co. , brokerage giant Merrill Lynch & Co. and Wachovia Corp. up more than 2 percent. Bank of America Corp. the third-largest bank, advanced 1.6 percent, while the KBW Bank Index , a broad measure for large banks, gained 1.2 percent.
"The regulatory environment has been hostile for the past three or four years," said Dick Bove, veteran bank analyst at Punk, Ziegel & Co. "It was a convincing win by the GOP: they got the Senate, the House and the presidency. The speculation among investors is that regulators will back off."
Among the losers were companies involved in alternative energy like FuelCell Energy Inc. Ballard Power Systems and Plug Power Inc. as Kerry favored policies focused on energy conservation, use of alternative energy sources and cutting dependence on foreign oil.
(Additional reporting by Ben Hirschler in London, Dan Burns, Chelsea Emery, Anna Driver, Deepa Babington and Joseph Giannone in New York)
Policies Expected During Bush's Second Term
November 5, 2004
Washington - Following are some policies President Bush has said he will pursue in his second term in office:
- Continue training Iraqi security forces to double the current 98,000 by mid-2005.
- Continue six-party talks with North Korea but rule out direct bilateral negotiations.
- Support European efforts to get Iran to back away from developing nuclear weapons before bringing the matter to the U.N. Security Council.
- Create new office of national director of intelligence. Has submitted a plan to the U.S. Congress that would give the new director authority over much of the intelligence community but not the full budgetary powers sought by the independent Sept. 11 commission.
- Shift military forces from Cold War-era bases in Europe to outposts closer to countries on the frontline of the U.S.-led war on terror.
- Renew all provisions of the USA Patriot Act, some of which are set to expire in 2005.
- Increase the number of border-patrol agents and step up biometric identification - using machines that can read documents containing digital fingerprints or photos - at major border crossings.
TAXES AND JOB GROWTH:
- Has asked Congress to make permanent the tax cuts approved in 2001 and 2003, saying they will help create jobs.
- Set up $3,000 re-employment accounts to assist the unemployed in searching for jobs. The accounts would cover expenses such as transportation and child-care.
- Limit medical malpractice lawsuits, which some analysts say have spurred soaring health care costs.
- Establish health savings accounts system to help people pay for health insurance. The accounts would be funded by tax-free deductions from paychecks and businesses could deduct contributions from their taxes.
- Give tax credits to low-income workers who cannot afford health care.
- Move to require more standardized testing for high school students. Bush's "No Child Left Behind Act" ties federal funding for public schools to test scores.
- Divert some Social Security taxes to private investment accounts for younger workers.
ENERGY AND THE ENVIRONMENT:
- Mandate greater automobile fuel efficiency, build a natural gas pipeline to Alaska and encourage the use of alternative fuels.
- Open Alaska's Arctic National Wildlife Refuge to oil exploration.
- Build new nuclear power plants and allow storage of nuclear waste in Nevada's Yucca Mountain.
- Increase funding to develop "clean-coal" energy plants.