Wall Street report: Tuesday close

WEAPONS makers were big winners as investors decided that America will spend more on defence after the Republicans swept the board in the mid-term Congressional elections.

The Dow Jones Industrial Average rose 106.67 points or 1.2% to 8578.27, to reach the highest levels since August. The Dow has vaulted 1400 points since 9 October. The Nasdaq Composite Index moved into the black in afternoon trading, to close ahead 4.62 points to 1401.16.

The Dow was helped along by defence companies United Technologies, up $1.03 or 1.6% to $63.73, and Boeing ahead $1.85 or 6.2% to $31.52. Lockheed Martin jumped $3.42 or 6.8% to $53.65. Analysts said defence equipment manufacturers would see an increase in orders, regardless of whether the Republicans or Democrats emerged as winners in the closely-watch election.

The growing likelihood of an attack on Iraq early in the New Year also played into the rebound in defence shares, they said.

Wednesday's Federal Reserve Board meeting, with expectations of an interest rate cut, also appeared a factor.

General Motors, which could benefit from lower interest rates, surged $1.03 or 3% to $34.90. Wal-Mart emerged from a period of caution to trade higher by 97 cents or 1.8% to $54.42.

Financial services shares, which would normally gain on an imminent rate cut, were mixed. Citigroup moved up 41 cents or 1% to $38.01, JP Morgan added 46 cents or 2% to $22.47 and American Express fell 93 cents or 2.5% to $36.60.

With expectations of a rate cut so high, some analysts have been warning that a decision by the Fed not to change rates could send shares tumbling. The Fed has already cut rates to 41-year lows of 1.75% and some economists have been worried that the US is moving toward the Japan example where rates were cut to zero with little accompanying economic rebound.

Techs were restrained in the wake of the announcement from chip equipment maker Applied Materials that it would trim its workforce by 11% due to slow demand. Applied Materials' shares fell 64 cents or 3.9% to $15.81.

Intel lost 38 cents or 2% to $18.35 and IBM came off 82 cents or 1% to $81.68.