Rally Mode Continues On Election Day; Europe Follows Suit

[Chart courtesy of MarketWatch.com]

The major indexes extended gains for the second straight day Tuesday as Wall Street went into rally mode embracing the notion the uncertainty lingering over the presidential campaign will hopefully soon be over.

Investors also watched the US Congressional races as the outcome will go a long way in the debate on how to address the so-called fiscal cliff of spending cuts and tax hikes that automatically comes into effect in January unless the Congress acts.

Many economists foresee a difficult and protracted negotiation process on the issue which, if not resolved soon, risks throwing back the economy into a recession. Republican candidate Mitt Romney so far remains a Wall Street favorite as his promise of lower tax rates and less stringent regulations will benefit American corporations.

The Dow Jones Industrial Average (DJIA) jumped 133 points and the S&P 500 Index (SPX) rose 11 points with energy and financials outperforming while utilities were the sole loser among its 10 major industry groups.

The benchmark 10-year Treasury notes slipped for the first time in three days with longer maturity securities leading the decline as US voters cast their votes to decide whether President Barack Obama or challenger Mitt Romney will face the $607 billion challenge of spending cuts and tax hikes, popularly known as the ‘fiscal cliff’.

Yield on the benchmark 10-year Treasury notes climbed seven basis points to 1.75 percent while yield on 30-year Treasury bond rose five basis points to 2.92 percent.

The dollar slipped in afternoon trade on Election Day while traders scrutinized European economic data and developments in Greece.

European stocks pushed higher as the outcome of US elections overshadowed concerns about the struggling eurozone. The Stoxx Europe 600 index surged 0.6 percent to erase Monday’s 0.6 percent loss brought on by doubts over Greece’s next trance of bailout money.

Meanwhile, the European economy continued to struggle in the beginning of the fourth quarter. The final iteration for Markit Composite Purchasing Manager’s Index came in at 45.7 in October, slightly lower than the earlier estimate of 45.8. Data from the United Kingdom showed manufacturing declined 1.7 percent in September.

Greece was also in focus ahead of a probable vote on tax hikes and spending cuts Wednesday. Olli Rehn, the European Commissioner for economic and monetary affairs, said late Monday Athens and its international lenders and on track to reach a deal on the country’s next round of aid money.

The German DAX 30 index closed 0.7 percent higher in Frankfurt, lifted by a 2.5 percent jump in benchmark component Deutsche Bank.

Banking shares led the gains in Paris. The CAC 40 index rose 0.9 percent, helped by Credit Agricole SA and Societe Generale SA while the FTSE 100 index added 0.4 percent in London, lifted by security company G4S Plc and retailer Marks & Spencer Groups Plc.

Our Domestic Trend Tracking Index (TTI) headed higher and ended up at +1.73% while the International TTI closed the day at +3.73%.

For quick access to the most recent StatSheet including TTI charts and all momentum figures, click here. You can read the latest ETF Model Portfolio update here.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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