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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowWall Street got some good news from Citigroup Inc. today and responded with a huge rally.
Led by financial companies, the market made its first big move upward in weeks after Citigroup said it had operated at a profit during the first two months of the year.
The major indexes soared more than 5 percent, and the Dow Jones industrials index shot up 379 points, its biggest gain of the year.
The Dow jumped 5.8 percent to close at 6,926.25. The Standard & Poor’s 500 index rose 6.4 percent, to 719.58. And the NASDAQ composite rose a whopping 7 percent, to 1,358.28.
But analysts remain cautious. Word of New York-based Citigroup’s performance broke a months-long torrent of bad news from the banking industry, but analysts weren’t ready to say the stock market was at a turning point and about to barrel higher after a slide that’s lasted more than 16 months.
“To have a sustained rally, we have to have a shift in sentiment,” said Kurt Karl, chief U.S. economist at Swiss Re. “One day isn’t going to make a trend.”
Still, the Citigroup news offered investors some hope that the first quarter will show signs of improvement.
In a letter to employees yesterday, Citi CEO Vikram Pandit said the performance this year has been the bank’s best since the third quarter of 2007 – the last time it booked a profit for a full quarter. Based on historical revenue and expense rates, Citi’s projected earnings before taxes and one-time charges would be about $8.3 billion for the full quarter.
Pandit declined to say how large credit losses and other one-time items have been that would at least partially offset profit.
Financial stocks have been at the center of the market collapse that has left the major indexes at their lowest point in more than a decade. Reports of losses on bad loans and write-offs on shrinking assets have pounded banking stocks.
Once the world’s biggest bank by market value, Citi’s shares fell below $1 a share last week, but rose 40 cents today to close at $1.45.
Analysts have been worrying that hundreds of billions of dollars in government bailouts wouldn’t be enough to save the big banks. Citi has received about $45 billion in bailout funds.
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