- Market jumps on hopes of new treasury secretary
- Boost fails to help US banking giant
Wall Street ended a volatile week with renewed confidence last night, after reports that Barack Obama has chosen Timothy Geithner, the head of the New York Federal Reserve, as his treasury secretary.
As speculation mounted over Geithner’s nomination, shares rebounded. The Dow Jones industrial average recorded a 494-point gain on the day as stocks surged by 6.5% to close above the psychologically important 8,000 level at 8046.42. It was still 5% down for the week, however, as worries persist about the global economic slowdown.
Geithner, 47, has always been a favourite to take the top job and his appointment is expected to be announced by the Obama camp in the next 24 hours.
Banking stocks still suffered, though, despite the market’s abrupt recovery.
Citigroup, once the world’s biggest banking group, saw another $5bn (£3.35bn)wiped off its value after an emergency board meeting failed to come up with any initiative to stem the unprecedented flight of investors. Shares fell to $3 after the bank’s chief executive, Vikram Pandit, ruled out selling its retail stockbroking arm, Smith Barney, in an attempt to stop the rout.
Shares in Citigroup have lost more than half their value this week since Pandit announced plans on Monday to sack 52,000 workers. Measures by the bank and its biggest investors to reverse the share price decline, from a level of $54 two years ago, have all failed.
However, a Citigroup source within Pandit’s inner circle, defended the bank last night, saying the sinking share price “has nothing to do with our viability”. The source added that it was of no consequence if the price fell to zero.
(Obviously an expert!…)
“This is all about market perception,” she said, claiming that the market was wrong. “We are the same as everybody else. Our stock price is declining but so is everybody else’s.”
(…and a great observer too!)