Government Moves Rally Stocks
U.S. stocks staged the biggest weekly rally in more than 30 years after the government agreed to protect Citigroup from more losses and automakers weighed cutting costs to win government aid.
Citigroup doubled on the government's plan to insure $306 billion in toxic assets owned by the bank, helping push financial companies in Standard & Poor's 500-stock index to a record 31 percent advance. General Motors soared 71 percent as the company considered selling some U.S. brands. Ford Motor jumped 88 percent.
The S&P 500 rose 12 percent to 896.24 for the steepest weekly gain since 1974. The Dow Jones Industrial Average increased 782.62 points, or 9.7 percent, to 8,829.04. The Nasdaq gained 10.9 percent to 1,535.57. The Russell 2000 index of small-cap stocks climbed 16 percent to 473.14.
Stocks also were encouraged by the Federal Reserve's stepped-up efforts to unfreeze credit markets and President-elect Barack Obama's selection of a team of financial and economic advisers, including former Federal Reserve chairman Paul Volcker. U.S. exchanges were closed on Nov. 27 for the Thanksgiving holiday.
The gains end a three-week slump in the S&P 500 driven by concern about a collapse in the U.S. auto industry and profit reports that showed the recession intensifying. The stock benchmark is still down 39 percent this year, the worst performance since 1931.
Citigroup, the second-biggest U.S. bank by assets, rose 120 percent. A 60 percent plunge in the company's stock price the previous week pushed regulators to stabilize the bank by injecting $20 billion and agreeing to cover losses related to its troubled assets. The government gets preferred shares and warrants equivalent to a 4.5 percent stake in Citigroup in exchange for the deal.
J.P. Morgan Chase, Bank of America and Goldman Sachs surged more than 39 percent each.
GM had the biggest gain in at least 28 years. The largest U.S. automaker is considering shedding its Saturn, Saab and Pontiac brands, according to people familiar with the matter.
Sears Holdings and Staples are among companies scheduled to report earnings this week.
The Treasury will auction $28 billion of three-month bills and $28 billion of six-month bills on Monday. They yielded 0.15 percent and 0.55 percent, respectively, in when-issued trading. The Treasury will sell one-month bills Tuesday.