Nov. 29 (Bloomberg) -- U.S. stocks staged the biggest weekly rally in more than 30 years after the government agreed to protect Citigroup Inc. from more losses and automakers weighed cutting costs to win federal aid.
Citigroup doubled on the government’s plan to insure $306 billion in toxic assets owned by the bank, helping push financial companies in the Standard & Poor’s 500 Index to a record 31 percent advance. General Motors Corp. soared 71 percent as the company considered selling some U.S. brands. Ford Motor Co. jumped 88 percent.
The S&P 500 rose 12 percent to 896.24, the steepest weekly gain since 1974. The Dow Jones Industrial Average increased 782.62 points, or 9.7 percent, to 8,829.04. The Russell 2000 Index of small-cap stocks climbed 16 percent to 473.14.
“It’s refreshing to see some rationality returning to stock prices,” said Richard Weiss, chief investment officer at City National Bank in Beverly Hills, California. “The central banks and central finance authorities are doing exactly what’s needed at this point.”
Stocks advanced after the Federal Reserve stepped up efforts to unfreeze credit markets and President-elect Barack Obama picked 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.
Citigroup Shares Double
The gains ended a three-week slump in the S&P 500 spurred by concern the U.S. auto industry may collapse and profit reports that showed the recession intensifying. The stock benchmark is down 39 percent this year, the worst performance since 1931.
Citigroup, the second-biggest U.S. bank by assets, rose 120 percent to $8.29. 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.
Financials in the S&P 500 climbed the past five trading sessions, the longest stretch of gains since October 2007. This week’s advance was the steepest since S&P created the industry group 19 years ago.
JPMorgan Chase & Co., Bank of America Corp. and Goldman Sachs Group Inc. surged more than 39 percent each. (source : bloomberg)
Rupesh Yatesh Dalal
MARKETCALLS
