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Dow and the

Nasdaq rocketed forth shortly after the open this morning on news that Gore could make a concession speech this evening. In fact, the blue-chip Dow initially gained over 100 points.

But, uh, the elections bounce -- which some had hoped might spur an end-of-the-year-rally -- may be pretty short-lived as worries about earnings and the economy prevail. The Dow pulled back this morning, but had begun to resume its climb. The Nasdaq was also making its way higher after accelerating into the red.

Tech and financial shares that have been battered by earnings woes were being battered some more, while stocks that would be in favor during a Bush presidency, such as oil, tobacco and drugs were getting a lift. Despite general weakness in financials,

J.P. Morgan


, was the strongest performer on the Dow. The financial giant, which has rallied robustly in the past week, was adding more than 21 points to the index's upside.

The U.S. Supreme Court ruled 5-to-4 late Tuesday night to reverse last Friday's ruling by the Florida Supreme Court that had said vote recounts could continue. The nation's highest court cited constitutional problems with a new vote recount and said the problems could not be fixed before the Electoral College's Monday deadline.

Improved chances for an interest-rate cut because of this morning's

retail sales numbers gave some fuel to the Dow. This morning's economic data showed that retail sales slowed sharply in November, dragged down by weak auto sales. The headline number fell 0.4% vs. forecasts of a 0.1% rise. The core number, which excludes automobile sales, rose 0.2% vs. expectations of a 0.3% climb.

Semiconductor stocks were hurting following a slew of downgrades on chip capital-equipment companies, however.

Salomon Smith Barney

downgraded 12 and

Merrill Lynch

downgraded eight companies in that sector this morning, including

Applied Materials







Philadelphia Stock Exchange Semiconductor Stock Index

, which tracks the sector, was lately down 2.4%. PC-makers were also falling after computer hardware and software maker



issued an earnings warning last night. Compaq was off 7.2%,



was 2.4% lower and



was falling 1.2%.

So it seems that recent immunity to earnings warnings that some thought marked a turn in the market may have worn off. Computer-maker Compaq, appliance-maker



, e-consultant



and online marketing company



were all falling this morning after warning last night or this morning that they would miss earnings targets. Compaq was the latest computer-maker to

disappoint. Whirlpool said it

would miss fourth-quarter 2000 and first-quarter 2001 earnings targets. Companies issue earnings warnings when they expect to miss their earnings targets for the quarter.

Back on the elections front, Bush is perceived as

particularly favorable to drug and tobacco companies because he's seen as lighter on reform and antitrust matters. He is also seen as favorable to the energy, oil and defense stocks. If Bush does emerge as the winner, the biggest question is whether he could push through his whopping tax-cut plan. Many think that with Congress in gridlock, the tax cuts are unlikely.

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Sector Watch

Drug stocks and tobacco stocks were charging higher as they are seen as beneficiaries of a Bush win. The

Philadelphia Stock Exchange Pharmaceutical Index

was rising 2.7% and the

American Stock Exchange Tobacco Index

was rising 3.1%.

On the tobacco front,

Philip Morris


was rising 5.7% and

R.J. Reynolds Tobacco Holdings


was jumping 11.2%.

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Treasury prices were higher on light volume, with about half of the gains coming after the release of data showing that consumer spending on goods fell sharply in November, signaling that economic growth may continue to slow.

The benchmark 10-year

Treasury note lately was up 8/32 at 103 7/32, pushing its yield down to 5.317%.

Treasuries rose in spite of predictions that a Gore will likely concede the election tonight.

The November

retail sales


definition |

chart |


) report showed a 0.4% decline in consumer spending on goods, widely missing economist predictions that it would rise slightly. Even though the bulk of the decline was in auto sales (excluding autos, retail sales rose 0.2%), the report suggests that the pace of consumer spending is slowing, leading the entire economy to a slower growth rate.

took a close look at the report in a

separate story.

That increases bond investor optimism about the prospect that the

Fed will lower interest rates in the months ahead. Traders of

fed funds futures have upgraded the odds -- to nearly 100% from 88% -- that the Fed will lower the key short-term interest rate to 6.25% from the current 6.5%.

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