Stock market likes the choice for Treasury
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By news wires
NEW YORK — U.S. stocks surged on a report President-elect Barack Obama would nominate New York Federal Reserve President Timothy Geithner as Treasury secretary. The leap higher in the final hour of trade came on the heels of a two-session freefall and cut in half the the market’s weekly decline.
After a volatile session, equities rocketed higher when NBC reported Obama would appoint Geithner to head the Treasury Department. The network also reported Obama had picked New Mexico Gov. Bill Richardson for secretary of the Commerce Department, and The New York Times reported Hillary Clinton has decided to accept the nomination for secretary of state.
Of the trio, Geithner is “the one people in the market wanted to see,” said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank.
The choice is particularly important, he said, in light of Treasury Secretary Henry Paulson’s comments earlier in the week “of being done with TARP,” or the Troubled Assets Relief Fund. Paulson announced the decision to let the next administration decide how to spend the remaining roughly $350 billion of $700 billion bailout package.
“The comfort level is there with Geithner,” said Fitzpatrick.
The Dow Jones industrial average surged more than 500 points before finishing at 8,046.42, up 494.13 points, or 6.5 percent. The blue-chip index lost 5.3 percent for the week.
“The market’s message is Geithner is a good choice. He’s young, he’s intelligent and he’s experienced. What this country needs are people who are young, full of energy, and can put in 26-hour days,” said Hugh Johnson, chairman of Johnson Illington Advisors.
Of the Dow’s 30 components, all but two ended in the green, led by aluminum producer Alcoa Inc., up 23.2 percent.
Wal-Mart Stores Inc. gained 4.5 percent after the discount retailer unexpectedly named international chief Mike Duke to succeed Lee Scott as president and chief executive, effective Feb. 1.
Shares of Citigroup fell 20 percent as analysts pondered what the future holds for the financial-services company, which a year ago was valued at about $180 billion, and now stands at $20 billion.
The S&P 500 gained 47.59 points, or 6.3 percent, to 800, leaving it down 8.4 percent from last Friday’s close.
The Nasdaq Composite gained 68.23 points, or 5.2 percent, to 1,384.35, with the index tallying a weekly loss of 8.7 percent.
Treasury prices declined, pushing yields up from multi-year lows hit the prior day.
“The Treasury market will gladly give up some gains to calm a bunch of near-suicidal equity traders,” said Kevin Giddis, bond analyst at Morgan Keegan & Co. Inc.
Investors have been looking for a clear message from Obama on who will lead his economic brain trust at a time when the country is facing its biggest financial crisis since the Great Depression.
In addition, some on Wall Street have grown frustrated with Paulson over his handling of the government's effort to rescue the banking system.
``Something needed to be done on the economy,'' said Ben Halliburton, chief investment officer at Tradition Capital Management. ``The fact that they've got the team together, maybe that is going to shorten the period of indecision.''
But while the uncertainty surrounding Obama's economic team has been removed, there are still plenty of unknowns facing the market.
So volatility will remain a major force on Wall Street for some time to come, said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.
He said worries about marquee companies from General Motors Corp. to Citigroup Inc. are unnerving investors.
``What we're seeing is these symbols of American business history really suffering and prompting investors to call into question the viability of the system,'' Ablin said.
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