Dow Back Above 8,000 After Geithner Pick
Stocks rallied Friday, with the Dow soaring nearly 500 points, following news that President-elect Barack Obama has chosen his point man to handle the U.S. economic crisis.
Wall Street cheered the news that Obama has picked New York Federal Reserve President Timothy Geithner to be Treasury Secretary.
The Dow Jones Industrial Average rallied 494.13, or 6.5 percent, to close at 8,046.42. The Nasdaqgained 5.2 percentto close at 1384.35and the S&P 500 index advanced 6.3 percent to end at 800.03.
After an initial pop out of the gate Friday, the rest of the day was pretty lackluster until the announcement, which came in the final hour of trading, sending stocks up like a rocket.
"I think it's a good pick for the market," Michael Cohn, chief investment strategist at Atlantis Asset Management, said of the Geithner nomination. "He's very involved in the storm that we're having right now ... He's got good experience and information from which to draw from," Cohn said. "And, he's a young guy and probably more inventive than somebody who was picked out of the Clinton administration."
Obama is expected to roll out his economic team on Monday and answer questions in an attempt to reassure the jittery market.
Obama's former Democratic primary rival, Hillary Clinton, is expected to be named Secretary of State after Thanksgiving. New Mexico Gov. Bill Richardson is expected to be named Commerce Secretary.
Friday's gains helped offset much of the week's losses, pushing the Dow back above 8,000. The Dow, which was down more than 1,000 at one point this week, ended the week down just 450 points, or 5.3 percent, for the week.
It was a tumultuous week, marked by a fresh wave of bank layoffs, some dismal news from retailers and Japan joining the ranks of countries in recession. A late-day selloff sent stocks down Monday, back up Tuesday then into a downward spiral Wednesday and Thursday that saw the Dow break through 8,000 one day and 7,882 the next day as Congress hit the brakes on the auto bailout and uncertainty about the TARP plan continued to make investors queasy.
But the news of Obama's cabinet picks helped bring the market one piece of certainty and some optimism that there is leadership in Washington.
"One of the major reasons why this market's sold off ... is that the perception in this market is that, literally, there's someone standing there with $700 billion, yet they can't make a good decision on how to spend the money," Cohn said.
Citigroup shares fell 20 percent, ending below $4 a share, after earlier rallying back above $5. In the previous two sessions, the stock lost half of its value. CEO Vikram Pandit, aiming to swat down rumors that the company may be sold off in pieces, said the firm would not sell its Smith Barney brokerage unit.
Financials recovered some of their earlier losses but kept a lock on the bottom three spots on the Dow, with Citigroup the biggest drag, followed by JPMorgan and Bank of America .
Alcoa was the top gainer on the Dow, jumping 23 percent, helped by a recovery in commodity prices.
General Motors and Ford joined the late-day rally after a rollercoaster session. GM rose 6.3 percent and Ford gained 2.9 percent. On Thursday, the Big Three CEOs were sent back to Detroit on their private jets without a bailout as Congress agreed to revisit the issue in December. Heeding Congress's warning, GM announced plans to sell two private jets.
Shares of Dell Computer skidded 5.2 percent after the computer maker reported its earnings fell but beat expectations as cost-cutting measures and a rise in consumer sales helped offset weakness in corporate sales. CEO Michael Dell said in a conference call that the company experienced "a significant challenge" in the third quarter and was likely to face more challenging market conditions ahead.
Meanwhile, Heinz rose 4.1 percent after the company reported its profit rose 22 percent, helped by price increases, currency hedging and strong sales in North America and emerging markets. The maker of Heinz ketchup, Ore-Ida potatoes and Smart Ones frozen foods also backed its full-year forecast.
In the latest sign of how tough it is for retailers, AnnTaylorposted a lossas same-store sales tumbled 20 percent. The women's apparel chain also declined to offer an outlook for the crucial holiday-season quarter but said that margins would be under pressure in this highly promotional season. Its shares shed 9.7 percent.
Gap jumped 27 percent after two brokerage firms upgraded their ratings on the stock. Citigroup raised its rating to "buy" from "hold," citing the company's strong balance sheet and tight control on inventory. Cowen raised its rating to "outperform" from "neutral," calling the shares "too cheap" given the firm's cash flow and solid balance sheet.
On Thursday, Gap stock hit a six-year low in regular trading. After the closing bell, the apparel chain beat earnings expectationsand backed its full-year guidance, helped by its tight reins on inventory and cost-cutting measures.
Wal-Mart , which has been one of the biggest beneficiaries of the spending slowdown as shoppers flock to its everyday low prices, announced Friday that Mike Duke will succeed Lee Scott as CEO. Its shares rose 4.5 percent.
>> To track how the holiday season is going, check out CNBC's Holiday Central blog.
People at risk of foreclosure will get a reprieve during the festive season as mortgage finance companies Fannie Mae and Freddie Mac have suspended foreclosure sales between Nov. 26 and Jan. 9.