Nov. 24 (Bloomberg) -- U.S. stocks posted the biggest two- day rally since 1987 after the government said it will guarantee $306 billion of troubled Citigroup Inc. assets and lawmakers pledged to pass another economic stimulus package.
Citigroup, which lost 60 percent of its market value last week, rebounded 58 percent after the Treasury also agreed to inject $20 billion into the company. JPMorgan Chase & Co. and Bank of America Corp. jumped more than 21 percent, sending the Standard & Poorâ€™s 500 Financials Index to a record gain, as the government rescue boosted confidence in the banking system. Home Depot Inc. and General Electric Co. climbed more than 8 percent on speculation a new stimulus will spur economic growth.
The S&P 500 added 6.4 percent to 851.31, capping a two-day gain of 13 percent. The Dow Jones Industrial Average climbed 388.68 points, or 4.8 percent, to 8,435.1. The Nasdaq Composite rose 6.3 percent to 1,472.02. Europeâ€™s Dow Jones Stoxx 600 climbed 8.4 percent, while the MSCI Asia Pacific Index slipped 0.7 percent.
â€śJob 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,â€ť James Dunigan, managing executive for investments at PNC Wealth Management in Philadelphia, said on Bloomberg Television. PNC Wealth Management oversees $63 billion.
Todayâ€™s gains followed a 6.3 percent rally in the S&P 500 on Nov. 21 after President-elect Barack Obama picked New York Federal Reserve Bank chief Timothy Geithner as Treasury secretary. The index has tumbled 42 percent this year and closed at an 11-year low on Nov. 20 after almost $1 trillion of financial-company losses caused corporate profits to decrease for five straight quarters.
Obama today announced Lawrence Summers, a former Treasury Secretary who stepped down as president of Harvard University in June 2006, as White House economic director. He said policy makers had to â€śact swiftly and act boldlyâ€ť to avert the loss of millions of jobs next year.
â€śThereâ€™s an optimism hereâ€ť that Obama â€śis going to be thoughtful and is working very hard right now to establish a fundamental foundation by the time he is inaugurated in January,â€ť said Douglas Christopher, a partner at Crowell Weeden & Co. in Los Angeles, a regional brokerage firm with $7 billion under management.
Citigroup climbed $2.18 to $5.95 today, snapping a weeklong losing streak. The cash injection from the Treasury adds to the $25 billion the company received last month under the Troubled Asset Relief Program. In return for the cash and guarantees, the government will get $27 billion of preferred shares paying an 8 percent dividend.
The Treasury, Fed and Federal Deposit Insurance Corp. said in a joint statement that the move aims to bolster financial- market stability and help restore economic growth. ...