- The Washington Times - Monday, November 24, 2008

UPDATE:

The government plan to bail out colossal Citigroup with $306 billion in guarantees rallied U.S. stock markets broadly in the biggest two-day jump in 21 years Monday as President-elect Barack Obama unveiled his economic policy team and warned the economy is likely to worsen before it improves.

The Dow Jones Industrial Average soared nearly 397 points, bringing its advance since Friday to 11 percent. The broader Standard & Poors 500 zoomed up more than 51 points, or 13 percent since Friday. The value of Citigroup shares shot up 58 percent.

The bailout of Citigroup pushed the rally, which at one point sent the Dow up more than 500 points, and the prospect of another economic stimulus package seemed to be giving the market a helping hand. It was the biggest two-day rally for the market since 1987.

We have to do whatever is required in order to keep capital flowing, Mr. Obama told a news conference, saying he spoke earlier with President Bush.

President Bush has indicated he has the same approach, the same attitude. We are united in making sure the financial system works.

But, Mr. Obama said, the economy is likely to get worse before it gets better. Stocks in the financial and homebuilding sectors racked up some of the biggest gains of the day. Crude oil surged $4.52 to $54.45 a barrel on fears that OPEC again will cut production. But the price jump boosted energy stocks.

Job one is to continue to repair the psychology of this market, and the bailout or the help for Citigroup is an important part of that puzzle, James Dunigan, the managing executive for investments at PNC Wealth Management in Philadelphia, told Bloomberg Television.

Mr. Bush met with Treasury Secretary Henry Paulson and said afterward the government may help financial institutions again in the same way it did with Citigroup.

This is a tough situation for America, he said. But we will recover. The first step is to secure our financial system. If need be, were going to make these kind of decisions to safeguard our financial system in the future.

“We take threats to our financial system seriously and we stand ready to take any steps necessary to prevent systemic events,” said White House deputy press secretary Tony Fratto.

All of the major stock indexes rose more than 2 percent after the opening bell at the New York Stock Exchange, with the markets apparently ignoring more dismal news from the housing industry and a slight rise in oil prices.

Sales of existing homes fell 3.1 percent to a seasonably adjusted annual rate of 4.98 million in October, the National Association of Realtors reported. That marked a drop from 5.14 million in September.

The promised guarantees by three government agencies Sunday plus an agreement by the Treasury to give another $20 billion to Citigroup spurred the stock market into higher territory for the second consecutive session. Citigroup rebounded more than 60 percent after having lost more than 60 percent of its value last week. Other financials also rose on the bailout news.

The Treasury agreed Sunday night to give the bank another $20 billion from its $700 billion bailout fund on top of the $25 billion it received from the federal agency last month.

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