Market Preview: Ready, Set, Vote!

NEW YORK ( TheStreet) -- Stocks made a rather timid advance on Monday as the anticipation builds ahead of Tuesday's presidential election.

The pollsters are anticipating a tight race, and while TheStreet is predicting the incumbent will prevail, just getting the vote out of the way may be enough to shake equities loose of their recent doldrums.

"We expect a relief rally could develop after the election to celebrate the outcome of the election regardless of which party wins," wrote Oppenheimer chief market strategist John Stoltzfus in emailed commentary on Monday. "The elimination of investor hesitancy to take actions ahead of the election should be positive for the market near term. Beyond the election, of course, lies the fiscal cliff and the need for constructive near-term action. Stay tuned."

The conventional wisdom, however, seems to think that Wall Street would look more favorably on a victory by Republican candidate Mitt Romney but Julian Jessop, chief global economist at Capital Economics pointed out that there are cons to go with the obvious pro-business pros of the former buyout king ending up in the White House.

"Mitt Romney's plans would tax equities more favourably and lighten the burden of regulation on the energy sector," he said. "Nonetheless, the margin of victory and the outcome of the elections for Congress will matter too, especially in dealing with the more immediate dangers posed by the 'fiscal cliff.' Any boost from Romney's pro-business stance would also need to be weighed against the additional uncertainty that might be created by more aggressive policies towards China or Iran, although we would expect him to move quickly to ease fears of a change in tack at the Fed."

Jessop said what happens in Congress could end up being "pivotal."

"The Republicans currently have a large majority in the House of Representatives, while the Democrats control the Senate albeit only by a slim margin," he said. "A Republican clean-sweep is therefore possible and would clearly be the preferred outcome in equity markets."

The most likely scenario, Jessop said, is that Congress will remain divided, and if that happens, the margin of victory for winner of the presidential election will come into play, determining what kind of mandate Obama or Romney is perceived as having when engaging in inevitable tussles with a split Congress.

"In this scenario, the larger the margin of victory for either candidate, the greater his authority, including in negotiating a deal to avoid the 'fiscal cliff,'" he said, adding later: " ... the markets might welcome any clear outcome regardless of who actually takes the White House."

Jessop also took issue with the idea that Romney being in means Federal Reserve Chairman Ben Bernanke is on his way out.

"Speculation that he would appoint a more conservative replacement for Ben Bernanke when the Fed Chairman's term ends in January 2014 has already undermined the prices of commodities, notably gold, as well as those of equities, while supporting the dollar," he said. "However, as we have noted before, bashing quantitative easing may be popular in opposition but the priorities in government would be different. A Romney administration would surely move quickly to reassure the markets that there would no immediate changes at the Fed."

Here at TheStreet, the main forum for news and analysis on Election Night will be a live blog hosted by TheStreet's Joe Deaux. Please check it out.

As for Tuesday's other scheduled news, AOL Inc. ( AOL) is slated to report its third-quarter results before the opening bell, and the average estimate of analysts polled by Thomson Reuters is for earnings of 17 cents a share in the September-ended period on revenue of $521.6 million.

Shares of the New York-based Web content company have more than doubled so far this year, hitting a 52-week high of $37.94 on Oct. 17. In late August, AOL announced plans to distribute a special cash dividend of $5.15 per share to stockholders before the end of the year, giving the stock an extra pop.

Also fueling the bullishness was a strong second quarter when AOL swung to a profit and posted a 2% year-over-year revenue drop, its lowest decline in seven years. The sell side is still skeptical with 8 of the 13 analysts covering the shares at hold and the median 12-month price target sitting at $34, below Monday's close at $35.81.

Other early reporters on Tuesday include Calpine ( CPN), Coeur D'Alene Mines ( CDE), CVS Corp. ( CVS), EchoStar Communications ( DISH), Fossil ( FOSL), Hecla Mining ( HL), Intercontinental Hotels Group ( IHG), International Flavors & Fragrances ( IFF), LouisianaPacific ( LPX), Marsh & Mclennan Cos. ( MMC), Martin Marietta Materials ( MLM), National Semiconductor ( NSM), NYSE Euronext ( NYX), Office Depot ( ODP), OfficeMax ( OMX), Treehouse Foods ( THS), and Vitamin Shoppe ( VSI).

The late roster features Alamo Group ( ALG), BankAtlantic Bancorp ( BBX), Cache ( CACH), Coca-Cola Bottling ( COKE), DryShips ( DRYS), Georgia Gulf ( GGC), Goodrich Petroleum ( GDP), News Corp. ( NWS), Rackspace Hosting ( RAX), Silicon Graphics International ( SGI), Vitesse Semiconductor ( VTSS), and ZipRealty ( ZIPR).

Tuesday's economic calendar is light with just the weekly Johnson Redbook retail sales index and the ICSC-Goldman Sachs chain store sales index due in the morning.

And finally, Zillow ( Z) was a big mover to the downside in late trades after the Seattle-based real estate information company gave a soft revenue outlook for the final quarter of 2012.

The company also announced a small acquisition, spending $12 million in cash and 150,000 restricted shares to purchase Mortech, a Lincoln, Neb.-based mortgage software and services company.

The stock was last quoted at $26.73, down 22%, on volume of more than 1 million, according to Nasdaq.com.

-- Written by Michael Baron in New York.

>To contact the writer of this article, click here: Michael Baron.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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