Timothy Geithner, president and chief executive officer of the Federal Reserve Bank of New York, speaks during an Economic Club of New York luncheon in New York, on June 9, 2008. Photographer: Daniel Acker/Bloomberg News
Nov. 21 (Bloomberg) — U.S. stocks rallied and the Standard & Poor’s 500 Index rebounded from an 11-year low after President-elect Barack Obama picked New York Federal Reserve Bank chief Timothy Geithner to head the Treasury.
“This news could really give the stock market a badly needed shot in the arm,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, wrote in an e-mail to clients. Geithner is a “fantastic choice to help lead the financial markets out of the wilderness.”
Citigroup Inc. pared a 35 percent slide and JPMorgan Chase & Co. trimmed a 16 percent tumble in the final hour as a Democratic aide said Obama will name Geithner to replace Henry Paulson. National-Oilwell Varco Inc. and Chesapeake Energy jumped more than 20 percent as oil rose for the first time in six days. The rally came after this week’s rout dragged the S&P 500’s price-to-earnings valuation to the cheapest since 1995.
The S&P 500, which capped a third-straight weekly decline, gained 6.3 percent to 800.01. The Dow Jones Industrial Average rose 494.37 points, or 6.6 percent, to 8,046.66, while the Nasdaq Composite Index added 5.2 percent to 1,384.35. Almost five stocks gained for each that fell on the New York Stock Exchange.
Benchmark indexes swung between gains and losses earlier as growing concern over the survival of Citigroup offset a rally in commodities producers.
The S&P 500 extended its 2008 slide to 49 percent yesterday and was poised for the worst annual decline in its 80-year history after economic reports depicted a deepening recession and lawmakers postponed a vote on a plan to salvage the auto industry. Citigroup, which has about $2 trillion of assets, has fallen for nine of the last 10 days on concern more companies and consumers will default as the economy worsens.
The benchmark for U.S. equities trimmed its yearly loss to 46 percent today, still the worst year since 1931. The S&P 500 tumbled 8.4 percent this week. The Dow average declined 5.3 percent, while the Nasdaq Composite Index lost 8.8 percent.
Last Updated: November 21, 2008 16:09 EST
By Eric Martin