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US stocks shoot higher on Citigroup profit news

US stocks shoot higher on Citigroup profit news

Wall Street got some good news from Citigroup, and responded with a huge rally.
Led by financial stocks, the market made its first big move upward in weeks Tuesday after Citigroup Inc. said it had operated at a profit during the first two months of the year. All the major indexes soared more than 3 percent, and the Dow Jones industrials shot up 250 points.
In a letter sent to employees Monday, Citi Chief Executive Vikram Pandit said the bank had an operating profit of $8.3 billion before taxes and special items through February _ its best performance since the third quarter of 2007.
Pandit declined to say how large credit losses and other one-time items have been that would at least partially offset profit. However, word of the bank's performance broke at least temporarily a months-long torrent of bad news from the banking industry that has pounded financial stocks and in turn, the overall market.
Meanwhile, according to a report in The Wall Street Journal that cited people familiar with the matter, government officials have been examining additional ways to stabilize the bank should further problems arise. Late last month, in its third attempt to rescue the bank from collapse, the Treasury Department moved to take up to a 36 percent stake in Citi.
Citi shares jumped more than 24 percent while Bank of America Corp. was up nearly 20 percent. Other banking stocks were also sharply higher.
Financial stocks have been a primary driver in a market collapse that has left the major indexes at their lowest point in more than a decade. Every report of loan losses and asset writedowns have sent banking stocks to incredible lows _ Citi fell below $1 a share last week. And fears that hundreds of billions of dollars in government bailouts wouldn't be enough to save the big banks exacerbated the fears on the Street.
While Citi's news was something the market has hungered for, it wasn't clear whether Tuesday's gains would hold given that the rest of the economy is still in tatters, and that the banking industry is still far from healed.
But Federal Reserve Chairman Ben Bernanke further stoked the market as he called for a revamp of the country's financial regulatory system. Speaking before the Council of Foreign Relations, Bernanke said "too big to fail" companies must be subject to more rigorous supervision to prevent them from taking on excessive risk. Bernanke's remarks come as the Obama administration and Congress begin to devise their overhaul strategies.
The Dow Jones industrial average jumped 254.71, or 3.9 percent, to 6,801.76. The Standard & Poor's 500 index added 28.91, or 4.3 percent, to 705.44, while the Nasdaq composite rose 59.25, or 4.7 percent, to 1,327.89.
The Russell 2000 index of smaller companies rose 19.23, or 5.6 percent, to 362.49.
Advancing issues outnumbered decliners by 13 to 1 on the New York Stock Exchange, where volume came to 300.7 million shares.
Also Tuesday, the Commerce Department said wholesale inventories declined 0.7 percent in January, versus a 1.4 percent decline in December. This was better than the 1 percent drop economists had expected.
The market looked past news of more job cuts, which has been a particular sore spot for investors.
United Technologies Corp. said it plans to cut 11,600 jobs. The owner Pratt & Whitney jet engines also lowered its 2009 profit forecast because of an anticipated decline in revenue.
There was also more merger and acquisition news.
Late Monday, Dow Chemical signaled it would go through with a reworked deal to buy specialty chemicals maker Rohm & Haas for $15 billion. The revised deal limits the amount of debt the company will take on. The original deal, Dow said, would have been disastrous for the company, which has been forced to slash thousands of jobs as it weathers the recession.
Meanwhile, Genentech is reportedly close to striking a deal for a $95-per-share sale to Switzerland's Roche, the company's cancer drug partner. Investors, however, were largely unimpressed with Merck's $41 billion offer to buy fellow drugmaker Schering-Plough on Monday. A combination between the two companies had long been speculated. Still, news of big acquisitions normally moves the market in better economic times.
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On the Net:
http://www.nyse.com
http://www.nasdaq.com


Updated : 2021-07-31 21:10 GMT+08:00