Wall Street flies after government rescues Citi
NEW YORK (Reuters) - Stocks soared on Monday, capping the best two-day run since the aftermath of the 1987 stock market crash, as the government's decision to rescue Citigroup spurred an enormous relief rally.
Dow component Citigroup, the second-largest U.S. bank, surged nearly 60 percent to $5.95 and gave one of the biggest lifts to the Dow as the bailout plan eased jittery investors' concerns regarding the financial sector. Last week, Citigroup's stock tumbled to its lowest level in about 15 years amid uncertainty over the bank's future.
"The markets love a bailout," said Brian Gendreau, investment strategist at ING Investment in New York. "It seems to have instilled a bit of confidence in the sector itself."
Adding to the optimism, President-elect Barack Obama named his team of economic advisors -- viewed as being favorable for Wall Street.
Obama appointed New York Fed President Timothy Geithner as Treasury secretary and Lawrence Summers, who has previously held the Treasury post, as director of the National Economic Council.
The Dow Jones industrial average raced up 396.97 points, or 4.93 percent, to 8,443.39. The Standard & Poor's 500 Index
jumped 51.78 points, or 6.47 percent, to 851.81. The Nasdaq Composite Index leaped 87.67 points, or 6.33 percent, to 1,472.02.
A RALLY TO REMEMBER
The Dow has advanced 11.8 percent, while the S&P gained 13.2 percent in their best two-day rally since the days following the October 1987 stock market crash.
The government's cash infusion for Citi represented the biggest U.S. bank bailout to date, lifting major financial stocks.
JPMorgan Chase rose 21.4 percent to $27.58, while Bank of America surged 27.2 percent to $14.59.
The S&P financial index climbed 18.8 percent in its best one-day percentage gain ever.
Wall Street briefly pared gains after President-elect Barack Obama named his economic team, as expected, but did not offer any specific dollar figures or other new details on a stimulus plan.
Shares of iPod maker Apple Inc advanced nearly 13 percent to $92.95 and gave the biggest boost to the Nasdaq 100. Microsoft shot up 5.1 percent to $20.69.
Campbell Soup Co, considered a recession-proof play, however, surprised investors with a disappointing full-year profit outlook, citing a stronger U.S. dollar. Campbell Soup's stock slid 7.6 percent to $33.52 on the NYSE.
Xerox Corp shot up 17.9 percent to $6.19 after the world's top supplier of digital printer and document management services forecast 2009 profits generally in line with analysts' expectations due to repeat customers and recent cost-cutting measures.
On the economic front, U.S. existing home sales fell 3.1 percent in October to an annual rate of 4.98 million units, while the median home price dropped to its lowest in more than four years, according to a report from the National Association of Realtors. The 11.3 percent drop in the median home price from October 2007 was the largest price decline on record, the NAR said.
Citigroup's rescue followed the disappearance this year of major Wall Street firms Bear Stearns Cos and Lehman Brothers Holdings Inc, as well as the failure of Washington Mutual Inc, the largest U.S. savings and loan.
In addition to the new capital, Washington effectively guaranteed most of Citi's $306 billion in losses on high-risk assets.
A Dow Jones index of U.S. home builders' stocks shot up 16.6 percent in late Monday afternoon trading.
Volume was active on the New York Stock Exchange, where about 2.04 billion shares changed hands, above last year's estimated daily average of 1.90 billion. On the Nasdaq, about 2.56 billion shares traded, above last year's daily average of 2.17 billion.
Advancers outnumbered decliners by a ratio of almost 8 to 1 on the NYSE, while on the Nasdaq, about three stocks rose for every one that fell.
(Additional reporting by Leah Schnurr; Editing by Jan Paschal)
