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Dow up 494 as Obama prepares to name treasury boss
(Agencies)
Updated: 2008-11-22 08:42 NEW YORK -- Wall Street put a stop to a terrifying decline and stormed higher Friday as President-elect Barack Obama appeared ready to tap the chief of the New York Federal Reserve as the next treasury secretary and hand him the herculean task of righting the US financial system.
The outbreak of buying pushed the Dow above 8,000 -- a figure that would have seemed like a nightmare three months ago but on Friday was a relief for Americans who have watched their investments and retirement savings drain away with alarming speed. In the two previous days, the Dow had lost a staggering 873 points, more than 10 percent of its value, and the broader Standard & Poor's 500 index had sunk to its lowest level since 1997. The turnaround came when word reached Wall Street that Obama was likely to nominate New York Fed president Timothy Geithner, 47, for treasury secretary. Geithner would assume top responsibility for tackling what threatens to be the deepest recession in a generation. Financial markets despise uncertainty, and investors were looking for a clear message from Obama on who will make up his economic brain trust. Wall Street had been voicing increasing frustration with Henry Paulson, the current treasury secretary, over his erratic handling of the federal financial rescue system.
Elsewhere, the government continued its efforts to shore up the financial system. The Federal Deposit Insurance Corp. also said it would guarantee up to $1.4 trillion in US bank debt for more than three years as part of the government's financial rescue plan. The decision is aimed at breaking the logjam of bank-to-bank lending. The health of the economy depends on the free flow of credit, and credit markets cinched up again as the market plunged earlier this week. The benchmark Standard & Poor's 500 index jumped 47.59, or 6.32 percent, to 800.03, and the Nasdaq composite advanced 68.23, or 5.18 percent, to 1,384.35.
The Russell 2000 index of smaller companies rose 21.23, or 5.51 percent, to 406.54. Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where consolidated volume came to 9.27 billion shares, up from the 8.96 billion shares that exchanged hands on Thursday. This makes Friday's volume the heaviest since the 11.20 billion seen on Oct. 10. The Friday afternoon rally managed to prevent the week from being one of the few most dismal in Wall Street history. Corporate mainstays running the gamut from Gap Inc. to Alcoa Inc. and Walt Disney Co. to Microsoft Corp. surged by double-digit amounts. But it did not erase heavy losses for the week. The Dow finished down about 5 percent for the five days, and other major averages suffered, too -- 8 percent for the S&P 500, nearly 9 percent for the Nasdaq. The Dow finished at 8,046, and the S&P just a hair over 800. But the S&P is still down 46 percent so far this year, the most since 1931. And there was still plenty to be concerned about. Citigroup stock took another huge hit -- down 20 percent of what's left of its value, to close at $3.77 -- as pressure built on the bank to sell part or all of itself. With the economic bad news piling up, President George W. Bush signed an extension of jobless benefits that will make sure millions of laid-off workers keep getting their unemployment checks as the holidays approach. Congress had approved the bill Thursday and rushed it to the president before he took a flight to Peru for an economic summit. Geithner worked at the Treasury Department for 13 years, leaving in 2001. People close to him say he is motivated by difficult challenges. Justin Rudelson, a friend of Geithner's from Dartmouth College, said he asked Geithner in June whether he was getting enough sleep. "He said, 'Justin, you have to realize, we live for this. We live for these kinds of crises,'" Rudelson recalled. While a Geithner appointment could remove the cloud of uncertainty surrounding Obama's economic team has been removed, there are still plenty of unknowns facing the market. As a result, volatility will remain a major force on Wall Street for some time to come, said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. He said worries about marquee companies from General Motors to Citigroup are unnerving investors. "What we're seeing is these symbols of American business history really suffering and prompting investors to call into question the viability of the system," Ablin said, referring to the functioning of the broader economy. Investors have also worried about the fate of the Detroit Three automakers, which are perilously low on cash and asking Washington for more help. But lawmakers have likely put off a vote on whether to extend a lifeline until next month and have asked the automakers for detailed plans about how they would use the money. The prospect of a bankruptcy filing by one or more of the companies has added to Wall Street's worries about the state of the economy. Bond prices fell Friday as credit markets eased somewhat following a freeze-up Thursday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, jumped to 3.20 percent from 3.00 percent late Thursday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.04 percent from 0.01 percent late Thursday. Light, sweet crude for January delivery rose 51 cents to settle at $49.93 a barrel on the New York Mercantile Exchange. The dollar fell against other major currencies, while gold prices rose. Overseas, Japan's Nikkei stock average jumped 2.70 percent. In European trading, Britain's FTSE 100 fell 2.43 percent, while Germany's DAX index fell 2.20 percent, and France's CAC-40 fell 3.33 percent. (For more biz stories, please visit Industries)
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