NEW YORK (AFP) - Wall Street staged a powerful rally Monday as US government rescue of banking giant Citigroup sparked a second straight session of frenzied buying.
The Dow Jones Industrial Average vaulted 396.97 points (4.93 percent) to close at 8,443.39 while the Nasdaq composite soared 87.67 points (6.33 percent) to 1,472.02.
The Standard & Poor's 500 index surged 51.78 points (6.47 percent) to 851.81.
Coming off the heels of massive losses last week, the rally was the second in two sessions. It followed Friday's comeback on news that president-elect Barack Obama was to name seasoned New York Fed chief Timothy Geithner as his Treasury secretary to head economic policy.
The gains extended after news of the US government rescue of Citigroup, which got fresh capital and a guarantee for its troubled mortgage assets, averting a possible collapse.
Amanda Collier at Hilliard Lyons said investors appeared "relieved" over the Citi bailout as well as the confirmation of the Obama economic team and a pledge by Obama to move quickly on the economy.
"The team was urged to quickly develop possibilities for 'Wall Street and Main Street' recovery plans," she said.
For Citigroup, the government agreed to back some 300 billion dollars in troubled mortgage assets and inject another 20 billion dollars in capital, boosting its stake in one of the world's biggest banks.
"The failure of Citi, with its two trillion dollar balance sheet, would have been absolutely catastrophic to the global banking system," said Fred Dickson at DA Davidson & Co.
"The government is making sure Citi doesn't fail ... At a minimum, the Fed's action should trigger a near-term short-covering rally in the big banks."
Paul Nolte at Hinsdale Investments said the market was ripe for a rebound after the bruising losses of the past few weeks.
"After reviewing the carnage of the past months, we can now say that stocks are priced to provide the best returns that we have seen but for only a couple times over the past 80-plus years," he said ahead of the market open.
Citigroup shares, which lost 60 percent last week, surged 57.8 percent to 5.95 dollars after news of the rescue plan, energizing buying in the financial sector.
Bank of America leapt 27 percent to 14.59 dollars, JPMorgan Chase added 21 percent to 27.58, Goldman Sachs climbed 26 percent to 67.42 and Morgan Stanley vaulted 33 percent to 13.88.
General Motors meanwhile rose 17 percent to 3.59 dollars as investors mulled the prospect of a government rescue for the automaker and the Wall Street Journal reported bankruptcy was now being considered.
Obama said Monday the US auto industry was too vital to disappear but vowed no "blank check" for a government bailout without long-term changes from the Detroit manufacturers.
Bonds fell after last week's huge rally. The yield on the 10-year US Treasury bond increased to 3.340 percent from 3.167 percent Friday while that on the 30-year bond rose to 3.755 percent against 3.663 percent. Bond yields and prices move in opposite directions.
37.19 (0.36%)
