Lights It Is Renaissance Posterous

The stock market hit a new 15-month high Tuesday, spurred by the biggest jump in health-care shares since the summer as traders bet on the outcome of a Senate race with big implications for proposed health-insurance reforms.

The Dow Jones Industrial Average gained 115.78 points, or 1.1%, to 10725.43, its highest close since Oct. 1, 2008. Pfizer and Merck were among the average's biggest gainers, up more than 2% each. Johnson & Johnson rose 1.2%.

The Nasdaq Composite Index was up 1.4%. The Standard & Poor's 500-share index gained 1.1%, led by the biggest one-day gain for the health-care sector since July. All the index's other sectors traded higher as well.

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Citigroup reports earnings before the bell.

The rally in health-care stocks came as voters headed to the ballot box in a surprisingly tight special election in Massachusetts to replace the late Edward Kennedy, with polls still open as of the market's closing bell. Democrats would lose their filibuster-proof 60-seat majority in the U.S. Senate if Republican candidate Scott Brown wins. That could pave the way for legislative compromises that could defer more to the private sector in health care and other industries.

"Not only could today's race turn out favorably, but the signal here is that we could also be headed for November elections that would cause some real gridlock" if the balance between Democrats and Republicans tips further in Republicans' favor, said Peter Cardillo, chief market economist at Avalon Partners in New York. "From the market's standpoint, that would be exactly what the doctor ordered."

Investors on Tuesday shook off new data from the National Association of Home Builders showing declining confidence among U.S. builders. NAHB said its housing-market index edged down one point to 15 in December, a level not seen since last June. However a measure of optimism for sales in the next six months held steady at 26.

Investors also mulled big developments at several bellwether companies Tuesday. Kraft Foods shed 0.6% after it clinched a deal to acquire Cadbury in a trans-Atlantic tie-up that end s the nearly 200-year independence of Britain's most famous candy company.

Citigroup rose 3.5% despite reporting a fourth-quarter loss. Investors were relieved to see improvement in the bank's losses from consumer loans in the United States, Asia, and Latin America.

"We're seeing very bullish psychology in the market today, given the news that's out there on the financials," said Michael K. Farr, president of the portfolio-management firm Farr, Miller & Washington. "People who are buying today are buying the story of an eventual turnaround, that we'll have an orderly transition to profitability" among big Wall Street firms.

The dollar strengthened on Tuesday. The U.S. Dollar Index, which tracks the greenback against a basket of six currencies, was up 0.6%.

Treasurys were lower, with the 10-year note off 7/32 to yield 3.704%. Gold futures climbed.

—Donna Kardos Yesalavich and Kristina Peterson contributed to this article.

Write to Peter A. McKay at peter. mckay@dowjones.com

My true concern here is that with the absence of a public option, big pharma smells a captive consumer pool. Keep your eyes on this one, please!!