Monday, 24 November 2008

Wall St jumps on Citi bailout

NEW YORK (Reuters) - U.S. stocks rallied on Monday as investors applauded the decision by Washington to inject $20 billion into Citigroup in an effort to prevent a bank collapse which could have endangered the global financial system.

Dow component Citigroup, the second-largest U.S. bank, surged over 50 percent to $5.92 and was among the Dow's top-weighted advancers 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."

The government's cash infusion for Citi represented the biggest U.S. bank bailout to date, lifting shares of major financial stocks. JPMorgan Chase rose 19 percent to $27.02, while Bank of America surged 24.1 percent to $14.23. The S&P financial index climbed 15.6 percent.

The Dow Jones industrial average ran up 376.97 points, or 4.68 percent, to 8,423.39. The Standard & Poor's 500 Index was rose 49.17 points, or 6.15 percent, to 849.20. The Nasdaq Composite Index was jumped 75.02 points, or 5.42 percent, to 1,459.37.

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 12 percent to $92.50 and gave the biggest boost to the Nasdaq 100. Microsoft was up 5.1 percent at $20.67.

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 $33.50 on the NYSE.

Xerox Corp shot up 16.6 percent to $6.12 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 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 drop on record, the NAR said.

Nevertheless, a Dow Jones index of U.S. home builders' stocks leaped 15.3 percent in late Monday afternoon trading.

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.

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