Stocks Conquer Election Angst

Big indices overcome early selling. The Dow hits a new high.
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Updated from 4:08 p.m. EST

Wall Street overcame morning selling pressure and closed to the upside Wednesday as traders shook off fears about the power shift in Congress.

The

Dow Jones Industrial Average

rose to another all-time high, gaining 19.77 points, or 0.16%, to 12,176.54, after falling as many as 53 points earlier. The index, which beat the previous record close set on Oct. 26, was supported by gains of 1.3% in

Altria

(MO) - Get Report

and

Exxon Mobil

(XOM) - Get Report

.

As for the other indices, the

S&P 500

was up 2.88 points, or 0.21%, at 1385.72, and the

Nasdaq Composite

advanced 9.06 points, or 0.38%, to 2384.94.

"The reversal is pretty impressive," said Jay Suskind, head of institutional equity trading with Ryan Beck & Co. "With the sense that maybe all that much won't change, the market has an optimistic viewpoint for the next few months. We've now had a good couple of days, but we need some more guidance from the political standpoint."

About 2.88 billion shares changed hands on the

New York Stock Exchange

, and advancers beat decliners by a 5-to-3 margin. Volume on the Nasdaq was roughly 2.12 billion shares, with winners outpacing losers 3 to 2.

The market initially saw weakness a day after Democrats easily won control of the House of Representatives for the first time in 12 years, picking up at least 26 seats against Republicans in Tuesday's midterm elections. Only 15 were needed for the Democrats to take a 218-seat majority.

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In the Senate, a close race in Montana was determined by midday to have been won by the Democratic challenger, meaning five slots have transferred from the GOP to Democratic hands. A race in Virginia, which remains the deciding factor in the balance of power, is still too close to call.

With earnings winding down and the economic calendar bare, the focus of the trading session was on the election results.

"Investment implications have been bandied about. However, in the long run, the economy wins out, and on that score we continue to look rather slow," said Paul Nolte, director of investments with Hinsdale Associates. "If not for a robust employment report, investors would be fretting about recession."

In addition to the Congressional moves, there also will be a change at the Pentagon. Defense Secretary Donald Rumsfeld will resign from his position, President Bush said. Former CIA chief Robert Gates will take Rumsfeld's place.

By sector, oil stocks were the big winners of the session. The Philadelphia Oil Service Sector Index finished higher by 2.2%, and the Amex Oil Index gained 1.4%. Airline stocks were among the hardest hit, with the Amex Airline Index losing 1.5%.

Before trading got underway, several earnings reports rolled in.

Sirius Satellite Radio

(SIRI) - Get Report

narrowed its quarterly loss, and

Barr Pharmaceuticals

(BRL)

had strong profits, but sales were a little light. Sirius closed higher by 0.7% to $4.12, while Barr lost 3.6% to $49.79.

Among analyst moves, JPMorgan Chase upgraded

Whole Foods Market

(WFMI)

to overweight from neutral, boosting shares by 3.3% to $49.04. Through the previous five sessions, shares of Whole Foods had dropped 25.6% amid worries about its growth prospects.

Wachovia downgraded homebuilder

Toll Brothers

(TOL) - Get Report

to market perform from outperform, and Lehman Brothers cut

Pulte Homes

(PHM) - Get Report

to equal-weight from overweight. Toll Brothers slumped by 1.9% to $27.50, and Pulte fell by 3.4% to close at $28.94.

Away from equities, the benchmark 10-year Treasury note was up 7/32 in price to yield 4.63%. The dollar was slumping against the world's other major currencies. Gold futures were down $9.40 to close at $618.30.

Elsewhere, the Energy Department released its latest data on weekly crude inventories. Oil stocks were up by 400,000 barrels. Gasoline stores were down by 600,000 barrels and distillate inventories dropped by 2.7 million barrels. Following the number, crude futures closed up 90 cents at $59.83 a barrel, nearly reversing the entire decline from the prior day.

Overseas, European markets were lower. London's FTSE 100 was down 0.1% to 6239, and Frankfurt's Xetra DAX was off 0.2% to 6349. Asia's markets also showed weakness. The Nikkei dropped 1.1% at 16,216, and the Hang Seng fell 0.7% to 18,811.

On Thursday, earnings reports are expected from

Disney

(DIS) - Get Report

,

JCPenney

(JCP) - Get Report

,

Kohl's

(KSS) - Get Report

,

Nvidia

(NVDA) - Get Report

and

Viacom

(VIA) - Get Report

.