Huge gains at Wall Street

Rescue plan for Citigroup gives market some respite

Stocks at Wall Street ended with good gains on Monday, 24 November, 2008 due to a rally fuelled by the financial sector. The rally was primarily fuelled by the news that Citigroup is getting rescue money from the government. The late and sudden rally that had started last Friday, 21 November still continued after Citigroup stock soared by 50% today after dropping more than 60% in the last week.

The Dow Jones Industrial Average closed up 396 points or 4.7% at 8,443, the Nasdaq gained 88 points or 5.9% to 1,492 and the S&P 500 surged 52 points or 6% to 851.

All the ten sectors ended in then green today led by the financial sector. The material and telecom sectors supported the market after the financials.

As per major news in Wall Street today, the Treasury will buy $20 billion in preferred stock yielding 8%, which follows the $25 billion investment in Citi. The Treasury, Fed and FDIC will provide guarantees for up to $306 billion of troubled assets in exchange for $7 billion in preferred stock and warrants for 254 million shares of common stock at a strike price of $10.61. Citi will absorb the first $29 billion in losses on the troubled assets and then 10% on any remaining losses.

Also, under the deal, Citi must get an executive compensation plan approved and must not pay a quarterly dividend larger than $0.01 without government consent.

Twenty nine out of thirty Dow stocks ended in the green today. Citigroup was the main Dow winner being followed by other financial stocks.

Among economic reports for the day, the National Association of Realtors reported today that existing-home sales fell in US in October, 2008 as the weak stock market and a poor U.S. economic backdrop caused buyers to pull back.

As per the report, resales of U.S. single-family homes and condominiums fell 3.1% in October to a seasonally adjusted annual rate of 4.98 million units.

The inventory of unsold homes on the market as tracked by the NAR fell 0.9% to 4.23 million, representing a 10.2-month supply at the current sales pace. Meanwhile, the median sales prices fell 11.3% in the past year to $183,300. This marked the lowest sales price since March 2004.

Among major earning reports for the day, Campbell Soup reported fiscal fourth quarter earnings that topped estimates, although revenue fell short of expectations. The stock declined by almost 8%.

On Monday, crude-oil futures for light sweet crude for January delivery closed at $54.5/barrel (higher by $4.51 or 9.2%) on the New York Mercantile Exchange. Earlier in the day, prices touched a high of $55.3. Prices reached a high of $147 on 11 July but have dropped almost 56% since then. Last week, prices fell by 13%. For this year in 2008, crude prices have dropped 46%.

Volume on the New York Stock Exchange topped 2 billion, with advancers overtaking decliners roughly 9 to 1. On the Nasdaq, 1.1 billion shares traded, and advancers beat decliners roughly 3 to 1.

For tomorrow, most investors will turn their attention to the preliminary third quarter GDP report which will hit the wires before market opens. The November Consumer Confidence Index and the September Home Price Index are both due later in the morning.