atprm
12-16-2008, 01:34 PM
U.S. Stocks Rally, Led by Banks, as Fed Cuts Rate to Record Low
By Whitney Kisling
Dec. 16 (Bloomberg) -- U.S. stocks gained the most in a week, led by banks, after the Federal Reserve reduced its benchmark interest rate to a record low and said it will employ “all available tools” to revive economic growth.
Citigroup Inc. jumped 7.6 percent and JPMorgan Chase & Co. climbed 9.2 percent after the central bank said it “stands ready to expand” purchases of mortgage-backed securities. Goldman Sachs Group Inc. rallied 13 percent after its first quarterly loss as a public company was smaller than some analyst estimates. Boeing Co. and Intel Corp. jumped more than 5 percent as all 10 industry groups in the Standard & Poor’s 500 Index rallied after the Fed’s announcement.
“They’re trying to rekindle the confidence of consumers and businesses, and that ultimately drives profits in the stock market,” said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland, Ohio, which manages $30 billion.
The S&P 500 added 2.6 percent to 891.03 at 2:47 p.m. in New York. The Dow Jones Industrial Average gained 190.36 points, or 2.2 percent, to 8,754.89. The Russell 2000 Index of small U.S. companies increased 2.6 percent.
The Fed cut its target rate for overnight loans between banks to a range of zero to 0.25 percent. The Fed’s decision came after simultaneous recessions in the U.S., Europe and Japan dragged the S&P 500 down almost 45 percent from its 2007 record and sent benchmark indexes from Brazil to Bangkok into bear markets.
Citigroup climbed 56 cents to $7.96, while JPMorgan jumped $2.63 to $31.26.
Goldman’s Loss
Goldman Sachs added $8.71 to $75.17. Its loss of $4.97 a share in the three months ended Nov. 28 was the company’s first quarterly deficit since going public in 1999 as asset values and investment-banking fees declined. The average estimate of 18 analysts surveyed by Bloomberg was for a loss of $3.73, with UBS AG’s Glenn Schorr estimating a loss of as much as $5.50 a share.
Compensation and benefits, the firm’s biggest expense, fell to a negative $490 million in the quarter, as the company cut 2,500 jobs and lowered average pay per employee 45 percent to $363,654. The company that set a Wall Street profit record in 2007 converted to a bank-holding company and accepted $10 billion from the U.S. government earlier this year as investors lost confidence in companies that rely on debt-market funding.
Morgan Stanley, the Goldman Sachs competitor that also became a bank, will report fourth-quarter results tomorrow. Analysts estimate a loss of 34 cents a share, excluding some items, according to a Bloomberg survey. Morgan Stanley rallied 16 percent to $15.76.
CIT Jumps
CIT Group Inc. added 9.7 percent to $4.50 after the commercial finance firm that ran short of cash this year said it generated $398 million of regulatory capital in an exchange of equity units as it seeks to qualify for as much as $2.5 billion in federal bailout funds.
Boeing, the world’s second-largest commercial jet maker, added $1.96, while Intel, the largest chipmaker, rose as much as 81 cents to $15.40.
The S&P 500 is poised for its worst year since the Great Depression after losses and writedowns at the biggest global financial companies reached almost $1 trillion and earnings at U.S. companies dropped for five straight quarters, matching the longest streak on record.
‘Panic and Fear’
“There’s enough panic and fear out there that the market, as always forward-looking, has largely discounted what’s going to happen,” Whitney Tilson, co-founder of T2 Partners LLC, told Bloomberg Television. “The views I’m expressing here are actually fairly widely held among investors.”
The S&P 500 has climbed more than 26 percent since slumping to an 11-year low on Nov. 20, gains that short seller Jim Chanos said will falter as President-elect Barack Obama’s infrastructure spending plan disappoints investors. Chanos said he’s adding to bets against construction, cement and steel companies.
“It will not be profitable to the extent that people think,” Chanos, whose Ursus Fund has risen more than 50 percent this year, told Bloomberg Television. “People are forgetting that there are always promises of infrastructure plans.”
More than three-quarters of money managers expect U.S. stocks to advance next year, while 72 percent say the market is undervalued, according to Russell Investments’ quarterly survey of investors.
To contact the reporter on this story: Whitney Kisling in New York at [email protected].
Last Updated: December 16, 2008 14:49 EST
By Whitney Kisling
Dec. 16 (Bloomberg) -- U.S. stocks gained the most in a week, led by banks, after the Federal Reserve reduced its benchmark interest rate to a record low and said it will employ “all available tools” to revive economic growth.
Citigroup Inc. jumped 7.6 percent and JPMorgan Chase & Co. climbed 9.2 percent after the central bank said it “stands ready to expand” purchases of mortgage-backed securities. Goldman Sachs Group Inc. rallied 13 percent after its first quarterly loss as a public company was smaller than some analyst estimates. Boeing Co. and Intel Corp. jumped more than 5 percent as all 10 industry groups in the Standard & Poor’s 500 Index rallied after the Fed’s announcement.
“They’re trying to rekindle the confidence of consumers and businesses, and that ultimately drives profits in the stock market,” said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland, Ohio, which manages $30 billion.
The S&P 500 added 2.6 percent to 891.03 at 2:47 p.m. in New York. The Dow Jones Industrial Average gained 190.36 points, or 2.2 percent, to 8,754.89. The Russell 2000 Index of small U.S. companies increased 2.6 percent.
The Fed cut its target rate for overnight loans between banks to a range of zero to 0.25 percent. The Fed’s decision came after simultaneous recessions in the U.S., Europe and Japan dragged the S&P 500 down almost 45 percent from its 2007 record and sent benchmark indexes from Brazil to Bangkok into bear markets.
Citigroup climbed 56 cents to $7.96, while JPMorgan jumped $2.63 to $31.26.
Goldman’s Loss
Goldman Sachs added $8.71 to $75.17. Its loss of $4.97 a share in the three months ended Nov. 28 was the company’s first quarterly deficit since going public in 1999 as asset values and investment-banking fees declined. The average estimate of 18 analysts surveyed by Bloomberg was for a loss of $3.73, with UBS AG’s Glenn Schorr estimating a loss of as much as $5.50 a share.
Compensation and benefits, the firm’s biggest expense, fell to a negative $490 million in the quarter, as the company cut 2,500 jobs and lowered average pay per employee 45 percent to $363,654. The company that set a Wall Street profit record in 2007 converted to a bank-holding company and accepted $10 billion from the U.S. government earlier this year as investors lost confidence in companies that rely on debt-market funding.
Morgan Stanley, the Goldman Sachs competitor that also became a bank, will report fourth-quarter results tomorrow. Analysts estimate a loss of 34 cents a share, excluding some items, according to a Bloomberg survey. Morgan Stanley rallied 16 percent to $15.76.
CIT Jumps
CIT Group Inc. added 9.7 percent to $4.50 after the commercial finance firm that ran short of cash this year said it generated $398 million of regulatory capital in an exchange of equity units as it seeks to qualify for as much as $2.5 billion in federal bailout funds.
Boeing, the world’s second-largest commercial jet maker, added $1.96, while Intel, the largest chipmaker, rose as much as 81 cents to $15.40.
The S&P 500 is poised for its worst year since the Great Depression after losses and writedowns at the biggest global financial companies reached almost $1 trillion and earnings at U.S. companies dropped for five straight quarters, matching the longest streak on record.
‘Panic and Fear’
“There’s enough panic and fear out there that the market, as always forward-looking, has largely discounted what’s going to happen,” Whitney Tilson, co-founder of T2 Partners LLC, told Bloomberg Television. “The views I’m expressing here are actually fairly widely held among investors.”
The S&P 500 has climbed more than 26 percent since slumping to an 11-year low on Nov. 20, gains that short seller Jim Chanos said will falter as President-elect Barack Obama’s infrastructure spending plan disappoints investors. Chanos said he’s adding to bets against construction, cement and steel companies.
“It will not be profitable to the extent that people think,” Chanos, whose Ursus Fund has risen more than 50 percent this year, told Bloomberg Television. “People are forgetting that there are always promises of infrastructure plans.”
More than three-quarters of money managers expect U.S. stocks to advance next year, while 72 percent say the market is undervalued, according to Russell Investments’ quarterly survey of investors.
To contact the reporter on this story: Whitney Kisling in New York at [email protected].
Last Updated: December 16, 2008 14:49 EST