A wave of buying swept WallStreet late Friday after news broke that President-elect Barack Obama has tapped New York Fed Chief Timothy Geithner as the next TreasurySecretary, overshadowing giant question marks hovering over Citigroup.
The late-day surge helped ease the pain of a week that saw the Dow lose roughly 500 points and the S&P 500 plummet to levels unseen since 1997.
Today's Market
The Dow Jones Industrial Average jumped 494.13 points, or 6.54%, to 8046.42, the broader S&P 500 picked up 47.59 points, or 6.32%, to 800.03 and the Nasdaq Composite added 68.23 points, or 5.18%, to 1384.35. The consumer-friendly FOX 50 gained 38.13 points, or 6.44%, to 629.89.
The afternoon rally coincided with the unveiling of several key Cabinet picks in the incoming Obama administration, but market participants believed stocks were poised to rally given their week-long plunge.
“The market is down almost 52% from its highs and I think people are saying maybe it's time to put some money to work here. We’re in the bottoming process," said Anthony Conroy, head trader at BNY ConvergEx. “I think we're getting close because we’re seeing people sell some pretty good stocks. Usually those are the last ones to be sold.”
For the most part, traders were just happy to see the markets return to the green after a two-day plunge that clipped 900 points from the Dow in the index's worst two-day percentage drop since October 1987.
"We certainly could use [a rally]. Unfortunately, absent anything different fundamentally, I think it’s just technical in nature," NYSEtrader Ted Weisberg told FOXBusiness. "No matter what the reason, I think everybody will be happy with an up day."
In fact,Friday marked just the 11th time out of November's 15 trading days that the Dow has closed in positive territory. The current bear market is now worse than any on record since the 1937-1938 meltdown in the midst of the Great Depression. “If that’s true, you should be buying because that was one of the best buying opportunities ever," said Conroy.
Geithner Bounce?
Minutes after news broke that Geithner would be joining the incoming Obama administration the markets took off, surging well beyond session highs. Geithner, a key figure in the financial crisis and an architect of the rescue of AIG (AIG), will take over amid the greatest financial crisis in nearly a century.
"He is well-liked and well-respected. The market needed something to hold onto because it was being crushed," said Ken Polcari, managing director at ICAPEquities.
Geithner is no stranger to the Treasury Department, having served as an undersecretary from 1999 to 2001. He's intimately involved in the current crisis in his role as New York Fed president.
It's not clear if the markets were cheering the Geithner pick, or just the removal of another mystery weighing on the markets.News also broke Friday afternoon that New Mexico Governor Bill Richardson has been tapped to lead Commerce Secretary and that Hillary Clinton has accepted the position of Secretary of State.
Citi-Sized Losses
The Geithner news dwarfied the gloom and doom that had been hovering over the financials, though not enough to help Citigroup (C), the financial conglomerate that has lost more than half of its market value this week.
The Wall Street Journal reported the bank is considering breaking itself up or even selling the entire company. The meltdown in Citi's shares has reportedly prompted execs to plead with lawmakers and regulators to reinstate the ban on short-selling of financial stocks.
“There is no question that Citi trading at these levels is really disturbing,” said Weisberg, who has owned Citi stock since 1990. “There are a lot of people watching that stock and I think it’s making people really nervous.”
The possible breakup or sale of Citigroup would mark yet another historic turn in 2008, a year that has transformed the global financial landscape. A bank with more than 300,000 employees that sells nearly every financial product invented, Citi was heavily exposed to many of the toxic assets that emerged from the subprime crisis.
Wall Street also remains anxious about the uncertain future of the Big Three automakers a day after Congress punted a bailout decision until after Thanksgiving. President-elect Obama’s transition team denied a Bloomberg report that the incoming administration is considering a prepackaged bankruptcy for the automakers as a solution to the crisis.
Crude Rebounds From3-Year Lows
On the energy front, crude oil futures rebounded from their three-year lows by closing 51 cents higher to $49.93 a barrel, ending its five day losing streak.
The commodity has been slammed by recession fears, losing 15% of its value over the past week. Crude is off by roughly 66% from its record closing high of $145.29 set on July 3. The spectacular plunge in oil prices has sent national gasoline prices below $2 a gallon for the first time since October 2004.
Other commodities surged on Friday, led by gold futures, which were up $43.10 to $791.80 an ounce.
Corporate Movers
Wal-Mart (WMT) announced CEO Lee Scott plans to retire in February and be replaced by Mike Duke, the company's head of logistics and international operations. Scott will stay on as chairman of the executive committee of the board of directors.
Dell (DELL) rose sharply a day after the No. 2 PC maker weighed in with a better-than-expected quarterly profit thanks to cost cuts. Still, the company had recently lowered the bar for earnings expectations and its revenue of $15.2 billion missed estimates.
Fannie Mae (FNM) and Freddie Mac (FRE), the government-backed mortgage giants, released plans to suspend foreclosures of occupied homes until early 2009 in an effort to give more time to rework borrowing terms.
Goldman Sachs (GS) opened below its $53 stock price from its initial public offering in 1999. The financial giant, once thought to be immune to the credit crisis and subprime debacle, has seen its stock price decline 76% in 2008, well off its all-time high of $250 set last October.
J.M. Smucker (SJM) beat the Street with an adjusted profit of $1.02 per share last quarter and confirmed its fiscal 2009 outlook, sending its shares sharply higher.
Nike (NKE) boosted its quarterly profit by 9% from 23 cents to 25 cents.
World Markets
Overseas stock markets were mixed onFriday as European indexes slumped, led by a 3.3% fall for France's CAC 40 Index and a 2.4% decline on London's FTSE 100 Index.
However, Asian markets enjoyed a solid rebound as Tokyo's Nikkei and Hong Kong's Hang Seng jumped 3% each in overnight trading.
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