Stocks jump after government bailout of Citigroup
NEW YORK -- Wall Street showed its relief today over the government's plan to bail out Citigroup Inc. -- a move it hopes will help address some of the uncertainty hounding the financial sector. Stocks jumped about 3 percent, extending Friday's big rally.
While the markets anticipated late last week that some sort of rescue was likely, investors appeared emboldened by the U.S. government's decision late Sunday to invest $20 billion in Citigroup and guarantee $306 billion in risky assets. The move by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. is only the latest effort this year to support a banking system troubled by bad debt and flagging confidence.
Besides implementing its $700 billion bailout plan for the overall financial industry, the government has bailed out insurance giant American International Group Inc. and taken over lenders Fannie Mae and Freddie Mac.
The market is also a little more optimistic because President-elect Obama is set to introduce his economic team on Monday and has called for another economic stimulus. His plan targets saving or creating 2.5 million jobs during the next two years. Any plan is expected to exceed the $175 billion Obama proposed during the campaign.
The moves by the government to once again step in and help a troubled bank as well as the broader economy helped buoy investor sentiment but investors remain cautious. The nation still faces a difficult economy and the stock market likely will continue to see volatility.
In midmorning trading, the Dow Jones industrial average rose 243.17, or 3.02 percent, to 8,289.59.
Broader stock indicators also jumped. The Standard & Poor's 500 index advanced 26.35, or 3.29 percent, to 826.38, and the Nasdaq composite index rose 41.31, or 2.98 percent, to 1,425.66.
The rise in stocks follows a rally Friday that saw the Dow industrials jump 494 points, or 6.5 percent. The other major indexes also rose sharply. Still, stocks ended the week with a loss after heavy selling Wednesday and Thursday.
Bond prices were mixed Monday as investors examined the government's bailout plan for Citigroup. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.29 percent from 3.20 percent late Friday.
The Treasury bill market showed continuing high demand, a sign of investors' caution. The yield on the three-month T-bill, considered one of the safest investments, fell to 0.02 percent from 0.04 percent late Friday.
