- The Washington Times - Tuesday, March 10, 2009

UPDATED:

Wall Street roared back with a mighty rally that pushed the major indexes to their biggest percentage increases in more than three months Tuesday following beleaguered Citigroup’s declaration that it has been operating at a profit so far this year.

The benchmark Standard & Poor’s 500 soared more than 6 percent to break through the 700 level, and the tech-heavy Nasdaq leaped ahead by more than 7 percent in what CNBC said marked its biggest gain since Oct. 28. The Dow Jones Industrial Average broke through the 6,900 mark.

At the close, the Dow soared 379.44, or 5.80 percent, to 6,925.14. The Nasdaq skyrocketed 89.64, or 7.07 percent, to 1,358.28. The S&P 500 leaped 43.04, or 6.36 percent, to 719.57.



The rally, fueled by the financial industry and followed by high-tech, oil services and building companies, marked the biggest percentage increases in the major indexes since Nov. 24, CNBC said.

The markets, dropping for months largely because of worries about the solvency of the financial industry, surged on news of profits by the severely indebted Citigroup.

It gathered steam after Rep. Barney Frank, Massachusetts Democrat, said he expects the Securities and Exchange Commission to restrict short selling in a bid to keep markets from spiraling downward. Mr. Frank chairs the key House Financial Services Committee.

A short sale is when an investor sells stocks in hopes it will go down and then buys it back at a profit when it does. The SEC may restore the so-called uptick rule that only permits a stock to be sold short when the last sale price was higher than the previous one. The SEC suspended the rule in 2007.

In addition, the markets also appeared to react favorably after Federal Reserve Chairman Ben S. Bernanke said there was a “good chance” the recession could end this year if the government could help restore stability to the banking system.

Financial and bank stocks led the way up, with Citigroup soaring 38 percent to close at $1.45 a share, Wells Fargo & Co. up more than 18 percent to $11.81, Bank of America up 27 percent to $4.79, JPMorgan Chase up 22 percent to $19.50 and Morgan Stanley up 26 percent to $20.84.

A market rebound, especially one that is sustained, would be a welcome respite for investors, who have been selling off rapidly in the past few weeks. The markets reached new 12-year lows Monday. The Dow is at its lowest point since April 1997, and the S&P 500 hit its lowest mark since September 1996. The Nasdaq is at October 2002 levels.

Citi CEO Vikram Pandit said in a letter to employees Monday that his giant corporation scored an $8.3 billion operating profit before taxes and special items through February. He said it marked the bank’s best first-quarter performance since the third quarter of 2007, the previous instance in which it recorded a profit for a full quarter.

But Mr. Pandit did not disclose credit losses, write-downs and additions to loan-loss reserves that could offset the profit picture.

Citi, one of the hardest hit banks, has taken tens of billions of dollars in write-downs and loan losses since late 2007 because the value of its investments has plunged and customers have not repaid loans because of the worsening recession, which started officially in December of that year.

The Treasury Department provided Citi with $45 billion last year, part of which will be converted into common stock, giving the government a 36 percent stake in the bank.

United Technologies Corp. of Hartford, Conn., said it will dismiss 11,600 workers worldwide this year, about 5 percent of its labor force, which together with the 6,400 people it laid off in 2008 will save the manufacturing firm $1 billion in 2009. It said it expects $2.7 billion less in revenues this year than anticipated “due to contracting markets worldwide.”

Company CEO Louis Chenevert said the outlook for commercial and aerospace and global construction has deteriorated since December “and the economic recovery previously anticipated in the second half of 2009 now appears unlikely.”

In good news, Cincinnati-based Kroger Co., the grocer, said its fourth-quarter profit rose 8 percent to $349.2 million, or 53 cents per share, up from $322.9 million, or 48 cents a share, during the similar period a year ago.

Analysts expected earnings of 51 cents a share, according to Thomson Reuters.

Elsewhere on the retail front, weekly sales at chain stores inched up 0.2 percent for the week ended March 7 but declined 0.9 percent when compared with the similar period a year ago, the International Council of Shopping Centers said in its weekly report.

“Sales ticked up in the latest week, though the underlying year-over-year trends in early March continued to resemble February’s sluggish sales pace,” said Michael P. Niemira, the group’s chief economist.

He said he expected same-store sales in March to be flat or down 1 percent from March 2008.

Consumer spending represents about 72 percent of the U.S. economy.

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