NEW YORK (AP) - The government's plan to bail out Citigroup sent
Wall Street soaring Monday for the second straight session as
investors hoped that the worst of the financial industry's problems
might finally be over. The Dow Jones industrials surged nearly 400
points, and all the major indexes jumped more than 4.5 percent.
The rally gave the market its first two-day advance in three
weeks and the Dow its biggest two-day percentage gain since October
1987, the month of the Black Monday crash.
The Dow's 891-point climb over the two sessions also wiped out
the 872-point plunge it suffered on Wednesday and Thursday, when
investors were anguished over the fate of Citigroup Inc. and
financial companies in general, and the future of the nation's
Although investors sensed late last week that a rescue of
Citigroup was forthcoming, they nonetheless were heartened, even
emboldened, by the U.S. government's decision late Sunday to invest
$20 billion in the company and guarantee $306 billion in risky
Wall Street's enthusiasm grew not only because the bailout
answered questions about Citigroup but also because many observers
saw the move as offering a model for how the government might
stabilize other banks.
"The government has taken a new quill out," said Scott Bleier,
founder of market advisory service CreateCapital.com. "They've
gone to where they didn't go before in terms of trying to secure
the system. Some of that vulnerability seems to be gone now."
Still, the market remained wary, especially with the economy in
a serious downturn. The Dow was up more than 500 points in the last
hour before giving up some of its gains. Many investors wanted to
take some money off the table before any bad news arrived. And the
market has frequently done sharp reversals since the start of the
credit crisis 15 months ago.
The efforts by the Treasury Department, the Federal Reserve and
the Federal Deposit Insurance Corp. to help stabilize Citigroup are
only the latest this year to support a banking system troubled by
bad debt and flagging confidence.
Besides its $700 billion bailout plan for the financial
industry, the government has bailed out insurance giant American
International Group Inc. and taken over lenders Fannie Mae and
"You're definitely seeing relief," said Anthony Conroy,
managing director and head trader for BNY ConvergEx Group. "More
than anything, the Fed repaired some of the psychological damage
that was being done to the sector. I think the Fed is poised to do
whatever they possibly can to help the financials get through the
"Not all banks are unhealthy, so knowing that the Fed is there
is enough," Conroy said.
The Dow rose 396.97, or 4.93 percent, to 8,443.39. Its last
two-day advance was Oct. 30 and 31, along with the rest of the
Broader stock indicators also jumped. The Standard & Poor's 500
index advanced 51.78, or 6.47 percent, to 851.81, and the Nasdaq
composite index rose 87.67, or 6.33 percent, to 1,472.02.
The Russell 2000 index of smaller companies rose 30.25, or 7.44
percent, to 436.79.
Over the course of Friday and Monday, the Dow rose 11.8 percent,
while the broader S&P 500 index jumped 13.2 percent. The Nasdaq
rose 11.9 percent. Paper gains in U.S. stocks over the two sessions
came to $1.2 trillion, according to the Dow Jones Wilshire 5000
Composite Index, which reflects nearly all stocks traded in
"I think it's a little bit of confidence coming back into the
system right now," said Harry Clark, chief executive of Clark
Capital Management. He contends the market began to form a bottom
after an eight-day selloff that ended Oct. 10, and on Thursday made
further headway toward setting a low that could give way to a
Bond prices were mixed Monday as investors examined the
government's bailout plan for Citigroup. The yield on the benchmark
10-year Treasury note, which moves opposite its price, rose to 3.33
percent from 3.20 percent late Friday.
The Treasury bill market showed continuing high demand, a sign
of investors' caution. The yield on the three-month T-bill,
considered one of the safest investments, fell to 0.01 percent from
0.04 percent late Friday.
The dollar was mostly lower against other major currencies,
while gold prices rose.
Light, sweet crude rose $4.61 to $54.54 on the New York
Stocks briefly came off their highs of the session in the middle
of the session, with the Dow paring its gain from 300 points to 200
points, as President-elect Obama formally named his economic team.
But Obama didn't offer specifics of an economic-stimulus package
nor state that he would push back a plan to raise taxes on the
richest Americans. He reiterated his goal of creating 2.5 million
jobs during the next two years.
Alan Lancz, director at investment research group LanczGlobal,
said that while the market might have wanted a firmer commitment
against raising taxes, it was too soon for Obama to outline
specifics. Lancz expects the new administration wouldn't rush to
implement the hikes if the economy appeared too weak.
"There's so many balls in the air right now he'd be foolish to
make specific comments," Lancz said, noting that the economic
picture could change greatly by Inauguration Day, which is Jan. 20.
Wall Street shrugged off a larger-than-expected drop in sales of
existing homes last month as investors instead focus on the
government's plans for the financial sector. The housing numbers
fell short of expectations, but investors expected sales would fall
sharply after last month's upheaval in the financial markets.
The National Association of Realtors said sales of existing
homes fell 3.1 percent to a seasonally adjusted annual rate of 4.98
million in October. That's down from 5.14 million in September.
The financial sector led Monday's advance, fueled by a sense
that the government might be developing a more nuanced yet
ready-to-apply remedy for financial firms. Citi surged $2.18, or 58
percent, to $5.95. Bank of America rose $3.12, or 27 percent, to
$14.59. JPMorgan Chase & Co. rose $4.86, or 21 percent, to $27.58.
Advancing issues outnumbered decliners by about 7 to 1 on the
New York Stock Exchange, where volume came to 7.65 billion shares,
compared with 9.27 billion on Friday.
Overseas, Britain's FTSE 100 jumped 9.84 percent, Germany's DAX
index surged 10.34 percent, and France's CAC-40 rose 10.09 percent.
Hong Kong's Hang Seng index fell 1.59 percent; markets in Japan
were closed for a holiday.
On the Net:
New York Stock Exchange: http://www.nyse.com
Nasdaq Stock Market: http://www.nasdaq.com
(Copyright 2008 by The Associated Press. All Rights Reserved.)