Stocks Soar On Naming of Obama Economic Team, Government Rescue of Citigroup | Voice of America - English
New York stock prices soared for a second straight session on Monday as investors responded favorably to the naming of President-elect Barack Obama's economic team and the late Sunday night government injection of funds into Citigroup. Meanwhile, British Finance Minister Alistair Darling announced a $30-billion package that supports struggling households and cuts certain taxes to get people spending again. VOA's Barry Wood has more.
Analysts say investors like the choice of Tim Geithner to be Treasury Secretary and Larry Summers to be head of the president's economic council. Both selections were announced on Monday by president-elect Obama. Markets also were relieved by the government's commitment to take over billions of dollars of bad loans held by Citigroup, formerly the biggest U.S. bank, and inject $20 billion of new money into the ailing institution. Citigroup stock rose nearly 60 percent on Monday to $5.95. The stock was battered last week, losing nearly two-thirds of its value. Analysts say Citigroup's collapse would have destabilized the financial system. The company, which is heavily involved in securitized loans, recently announced that it would eliminate 55,000 jobs. The Dow Jones Industrial Average on Monday gained 397 points to 8,443. In just the past two days, the index has recovered nearly 900 points of huge losses it has incurred because of the credit crisis during the last 12 months. From its peak in October of last year, the Dow has lost about 40 percent of its value. The rebounding U.S. dollar lost ground on Monday, falling to $1.28.5 to the euro and $1.51 against the British pound. Gold gained $21 to a little more than $821 an ounce. Oil prices rose to $54.50 a barrel. William Smith of Smith Asset Management says there is reason to be worried about the eventual inflationary impact of the amount of money U.S. authorities are pumping into the system. But in the short-term, he says the fiscal stimulus will prop up consumer demand and pull the economy out of recession. "The amount of stimulus that is being pumped into the system from various areas is just monstrous," said William Smith. "It is unprecedented. So sooner or later, that will kick in and take effect and will eventually get us to the other side [of this crisis]. Smith spoke on Bloomberg Television. President-elect Obama is preparing an emergency proposal for fiscal stimulus that would put several hundred billion dollars of additional money into consumers hands.