Wall Street rallies after Citi’s bailout plan, Obama’s new teamNovember 25th, 2008 - 10:01 am ICT by IANS
New York, Nov 25 (IANS) Buoyed by the US government’s massive rescue plan for Citigroup and announcement of President-elect Barak Obama’s economy team, Wall Street rallied behind Monday soaring to a new high.Bench-mark Dow Jones Industrial Average increased by as much as 397 points (4.9 percent) to 8443.39. When clubbed with the jump in Dow’s on Friday, this was the biggest two-day surge since 1989.
NASDAQ was up 87.67 points, or 6.33 percent, at 1,472.02, while the Standard & Poor’s 500-stock index rose 51.78 points, or 6.47 percent, to 851.81.
Market observers and investors attribute this sudden jump in stock prices mainly to two factors.
First, the $20 billion Citigroup rescue plan announced by the Bush Administration late Sunday. This is in addition to the $25 billion injected by the federal government earlier. The plan also includes the Federal Deposit Insurance Corporation guaranteeing losses of more than $300 billion as bad assets.
Secondly, Obama announced Monday morning in Chicago the Federal Reserve president, Timothy Geithner, would be his treasury secretary. He also announced that former Harvard president Lawrence Summers would head his National Economic Council.
“There’s optimism that Obama is going to be involved on Day 1,” Anthony Conroy, head equity trader at BNY ConvergEx Group, was quoted as saying by The New York Times.
Both the measures enthused confidence in the market by the investors. For instance, the Citi share, which had dipped to a historic low last week, gained 58 percent to end to a $5.95 a share at the closing of business Monday afternoon.
“There’s optimism that the Fed is doing the right thing,” Conroy said. “You can’t have a healthy market without healthy financials,” he told The Times.
Shares of other major financial investors and banks increase substantially. While stocks of Merrill Lynch increased by 38 percent and that of Morgan Stanley by 33 percent; shares of Bank of America, Goldman Sachs, J P Morgan Chase and Wachovia gained by more than 20 percent.
“We have a big event that everyone liked moving the financials today, but there’s really been no consistency in the sector,” Merrill Lynch strategist Brian Belski was quoted as saying by The Wall Street Journal.
“Geithner assures a smooth transition between the Bush Administration and that of Obama, because he’s already co-managing what’s happening now,” Stephen Leeb, president at Leeb Capital Management, told CNNMoney.com. “Geithner assures a smooth transition between the Bush Administration and that of Obama, because he’s already co-managing what’s happening now,” he said.
However, there were several analysts who were not that optimistic and said that they were still not confident. “The most shaky companies are leading the way,” David Kovacs, chief quantitative investment officer at Turner Investment Partners told The New York Times. “You don’t see the real solid companies going up the most,” he said.
Tags: bailout plan, barak obama, deposit insurance corporation, dow jones industrial, dow jones industrial average, federal deposit insurance corporation, harvard president lawrence summers, national economic council, timothy geithner, wall street rallies