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Citi Rescue Boosts Futures, Bank Stocks

CNBC.com
Monday, 24 Nov 2008 | 7:57 AM ET

U.S. stocks looked set for a positive start to the week Monday as investors welcomed news the government had stepped in to backstop troubled bank Citigroup.

Citi shares jumped over 30 percent in pre-market trading, following last week's severe battering. The government agreed to guarantee over $300 billion of Citi's troubled assets, but is still hammering out the conditions of the deal.

Citi will also receive $20 billion from the Troubled Asset Relief Program (TARP) from the Treasury in exchange for preferred shares with an 8 percent dividend.

Analysts were divided on whether the Citi bailout was the right move from the government. Investors, though, initially rewarded the move, sending shares up about 50 percent in premarket trading, though the bid was still below $6.

"The Citigroup bailout is still a halfway measure," investor Barton Biggs, managing partner of Traxis Partners, said on CNBC. "The banks aren't going to start lending again until the bad loans are off their balance sheets. This doesn't do it."

Stocks of some other large banks also were indicating higher as well, with JPMorgan Chase up nearly 4 percent premarket while Goldman Sachs gained about 6 percent.

Meanwhile, President-elect Barack Obama is expected to name his economic team, which added to the positive sentiment ahead of the open.

Timothy Geithner is to be named as treasury secretary, while Lawrence Summers is to direct the National Economic Council, transition officials said.

News of Obama's team helped the Dow Jones Industrial Average close above the psychologically important 8,000 level on Friday, having sunk below it earlier in the week.

In corporate news, the world's biggest brewer, Anheuser-Busch Inbevlaunched a deeply discounted rights issue to help fund the purchase of the Bud beer maker by the Belgian company.

In economic news, existing home sales for October will be released at 10 am.

On the earnings front, Campbell Soup will release numbers before the opening bell.

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