22 Nov 2008

Wall Street rallies on reports of Treasury appointment

1:30 pm on 22 November 2008

US stocks stormed higher in a late rally on Friday to cap another volatile week as investors welcomed reports that President-elect Barack Obama has chosen Timothy Geithner as Treasury secretary

Stocks limped into the day after a back-to-back pummeling that had left the S&P 500 at an 11-year low, and spent most of the day drifting in and out of positive territory.

Markets shot higher when NBC news reported that Timothy Geithner, president of the Federal Reserve Bank of New York, would be nominated as US Treasury secretary, driving the Dow and the S&P up more than 6%.

The news lifted uncertainty over who Mr Obama would appoint to lead Treasury amid the worst economic crisis since the Great Depression.

The Dow Jones industrial average jumped 494.13 points, or 6.54%, to 8,046.42. The Standard & Poor's 500 Index shot up 47.59 points, or 6.32%, at 800.03.

The Nasdaq Composite Index climbed 68.23 points, or 5.18%, to 1,384.35.

The S&P financial index, which had been down as much as 7.3% earlier in day as worries about the future of embattled bank Citigroup dragged on the sector, reversed course to end up 3.4%.

Climbing energy companies also boosted the market as the price of oil rose from a three-and-a-half-year low. Exxon Mobil jumped more than 10%

For the week, the Dow lost 5.3%, the S&P 500 fell 8.4%, and the Nasdaq lost 8.8%. Friday's gains made it the best day in just over a week.

Citigroup shares fall

Citigroup remained a weight on the markets, falling 20% to $3.77, following news reports that the company is considering selling pieces of its business or the entire company outright.

Citigroup Chief Executive Vikram Pandit tried to downplay speculation that the bank might sell major businesses.

Pandit told employees that the company does not want to change its business model, according to two people who heard him.

Earlier in the week the firm announced 52,000 job losses worldwide.

European stocks down

European bourses suffered a broad sell-off spurred by grim euro zone manufacturing data, and the price of government bonds in Europe was little changed.

British government bond futures rose, extending a week-long gilt market rally.

European stocks fell for the seventh time in nine sessions, with pharmaceuticals the biggest drag. Utility shares and mobile phone companies were the next biggest drags to the FTSEurofirst 300 pan-European index.

Fresh fears over the financial sector knocked down banking shares, such as Societe Generale which fell almost 14%.

Pharmaceutical stocks, which had been resilient over the past few weeks, took a beating with four of the top five contributors to the decline in the drug industry.

The FTSEurofirst 300 index of top European shares closed 2.6% lower at 760.97 points, its lowest closing level in more than five years.

The index, which is down nearly 50% in 2008, lost 12% on the week - its third consecutive week of losses - amid rising concerns over the prospect of a deep global downturn.

Investment bank Goldman Sachs forecast more pain, estimating real US gross domestic product would fall by 5% on an annual basis in the current quarter and unemployment would reach 9% in the fourth quarter of 2009.

In currency markets, the euro and sterling relinquished much of their rise against the dollar by midday, indicating investors' continued unease.

The dollar fell against a basket of major currencies, with the US Dollar Index off 0.39% at 87.944. Against the yen, the dollar rose 1.44% at 95.40. The euro rose 0.80% at $1.2557.