Stocks climbed on Tuesday as some investors bet that Republican Mitt Romney could pull off a surprise victory in the presidential vote, citing gains in defense and energy shares.
Gains were fairly broad-based, but among S&P 500 sectors, energy led the market along with materials and industrial shares, all sectors that rise with the economy.
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Defense shares like United Technologies shot higher, raising some market speculation that Romney,, who has called for increased military spending, could be moving ahead of Democratic President Barack Obama in the vote.
The S&P energy sector was up 1.8 percent. United Technologies was up 2.9 percent at $80.17 and Raytheon was up 2.6 percent at $57.93.
"Defense stocks are moving up, and coal stocks are up too, which are two sectors that are going to react more to a Romney victory than a President Obama victory," said Jon Najarian, co-founder of optionMONSTER in Chicago. Shares of Arch Coal were up 4.3 percent at $8.71.
Either way, traders said there was agreement that markets wanted a clear winner.
A decisive result in the presidential election would remove a major source of uncertainty that has dogged investors.
"There's been a lot of talk that once the election is decided, no matter how it went, just to the have the uncertainty over would be good for the market," said Rick Meckler, president of hedge fund LibertyView Capital Management LLC in Jersey City, New Jersey.
"Really it's a bit of the carryover from the Bush-Gore election."
Polls showed Obama and Romney in a tight race, with a few battleground states expected to decide the winner. In 2000, Republican George W. Bush won after a drawn-out legal battle over contested votes in his race against Democratic Vice President Al Gore.
The Dow Jones industrial average was up 168.66 points, or 1.29 percent, at 13,281.10. The Standard & Poor's 500 Index was up 14.41 points, or 1.02 percent, at 1,431.67. The Nasdaq Composite Index was up 19.20 points, or 0.64 percent, at 3,018.87.
Investors will also closely watch races in the Senate and House of Representatives that could affect the "fiscal cliff," or $600 billion in spending cuts and tax increases that are set to be automatically triggered at the end of the year.
The U.S. fiscal standoff threatens to bring on another recession unless a deal is reached between Congress and the White House.
Stocks began adding to gains around 11:30 a.m. in New York, shortly after the close of European markets. E-mini futures contracts, a contract based on the S&P 500 index, also jumped at that time.
Among other big gainers, shares of AOL Inc jumped 13.2 percent to $40.53 after it reported higher-than-expected revenue and profit on the strongest advertising growth the company has seen in seven years.
(Additional reporting by Angela Moon and Herbert Lash; Editing by Kenneth Barry)