Wall Street flies after govt rescues Citi

Wall Street flies after govt rescues Citi

New York: Wall Street 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 US bank, surged nearly 60% 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.

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%, to 8,443.39. The Standard & Poor’s 500 Index jumped 51.78 points, or 6.47%, to 851.81. The Nasdaq Composite Index leaped 87.67 points, or 6.33%, to 1,472.02.

A rally to remember

The Dow has advanced 11.8%, while the S&P gained 13.2% 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 US bank bailout to date, lifting major financial stocks. JPMorgan Chase rose 21.4% to $27.58, while Bank of America surged 27.2% to $14.59.

The S&P financial index climbed 18.8% 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.

On the economic front, US existing home sales fell 3.1% 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% drop in the median home price from October 2007 was the largest percentage price decline since the NAR started keeping records in 1968.