Wall Street Set for 'Geithner Rally'
US stock index futures pointed to a strong rally for Wall Street Monday as investors were eager for details of a plan to buy toxic assets by the government.
While some that the government's proposal would actually make things worse for the economy, futures traders greeted anticipation of the announcement with enthusiasm.
The major indexes were indicating gains of about 2 percent off the opening bell--welll off their highs for the morning.
Shares in financial companies benefited the most in premarket trading, with Bank of America up nearly 18 percent, Citigroup surging 21 percent and American Express, which had been under pressure since warning that credit card defaults were likely to rise this year, gaining 7 percent.
The Select Sector SPDR Financial exchange-traded fund that tracks the top companies in the sector gained nearly 8 percent premarket.
Asian stocks closed strongly higher and Europe was also firmly in the green, with banks the major gainers.
The government is likely to offer generous financing for private investors on Monday as part of a plan to purge banks of up to $1 trillion in toxic assets, according to various reports ahead of a briefing that US Treasury Secretary Tim Geithner will hold at 8:45 a.m New York time.
There are two parts to the plan, one to purchase securities, the other to purchase loans from banks, using a combined $75 billion to $100 billion of funds from the Troubled Asset Relief Program, people familiar with the plan told CNBC.
The plan will begin with $500 billion, roughly divided between the two different parts, but officials hope to be flexible and adjust the size as markets develop. Treasury spokesman Isaac Baker Saturday declined to comment until details of the plan are announced.
Questions remain over the issue of pricing the toxic assets and private investors are likely to want to take a closer look before dipping, analysts said.
Wilbur Ross, chairman and CEO of WL Ross & Co, told CNBC's Asia Squawk Box that he thinks the key issue is due diligence, whether private investors will be allowed to conduct an in-depth study of the toxic assets.
Despite the fall of the US dollar after the Federal Reserve's announcement that it will boost the money supply by buying Treasurys, China is still keen to buy US government bonds, viewing the credit risk as low overall, a senior Chinese central bank official said.
"Investing in American Treasurys, as an important part of our foreign exchange reserve management, will continue," Hu Xiaolian, a vice governor of the People's Bank of China, told a news conference.
Elsewhere, General Motors shares gained nearly 2 percent even as bondholders expressed concern over delays in the company's restructuring program.
Intel announced it will keep base salaries and annual incentive cash baselines flat for its listed officers for 2009.
The company sees significant cost savings in 2009 from compensation program reductions, including no salary hikes, cut in contributions to retirement savings plans and employee stock purchase programa, Intel said in a filing with the SEC. Shares gained 3 percent in premarket trading.
Tiffany reported a profit of 25 cents a share in the fourth quarter and said there were no signs of an improvement in the economic conditions.