While you were sleeping: Wall St rallies, CIT Group flounders

Tuesday 14th July 2009

Stocks on Wall Street rallied, led by banks, after analyst Meredith Whitney recommended Goldman Sachs Group as a buy and said lenders are set to advance.

The founder of Meredith Whitney Advisory Group LLC gave Goldman the only ‘buy’ rating of eight companies she follows. The firm rose 5.3% to US$149.44.

Bank of America rose 9.3% to US$12.99, leading the Dow Jones Industrial Average up 2.3% to 8331.68, after Whitney told CNBC that it was the cheapest US Bank stock.

JPMorgan Chase gained 7.3% to US$34.74.

The Standard & Poor’s 500 climbed 2.5% to 901.05 and the Nasdaq Composite rose 2.1% to 1793.21.

Investors are awaiting earnings this week from Goldman Sachs, JPMorgan, International Business Machines and Google Inc. Companies on the S&P 500 are expected to post an average 35% decline in second quarter earnings, and a 21% drop in the third, according to Bloomberg.

Treasury Secretary Timothy Geithner told CNN that the pace of the US economy’s slump has slowed but it still faces “enormous challenges” and it is too soon to know if a second stimulus package is needed.

American International Group surged 24% to US$14.57 after the Commercial Times reported that Primus Financial Holdings will make a US$2 billion bid for AIG’s life insurance unit in Taiwan.

CIT Group Inc. dropped 12% to US$1.35 on concern the lender won’t be able to gain government support for its debt sales, raising questions about its ability to survive.

Treasury Secretary Timothy Geithner declined to comment on what response the government may make.

“We have a significant interest generally in trying to make sure the financial system gets through this, adjusts where it needs to adjust and emerges stronger,” he told a media conference in London. “I’m actually pretty confident in that context we have the authority and the ability to make sensible choices.”

Stocks rallied in Europe, with the Dow Jones Stoxx 600 gaining 1.8% to 200.80, led by a 13% advance for Bank of Ireland and a 10% jump in Allied Irish Banks. Friends Provident Plc surged 13% after the insurer rejected an approach from Resolution.

Porsche SE surged 9.7% after Der Spiegel reported that Qatar has offered to buy a stake in the automaker.

The UK’s FTSE 100 rose 1.8% to 4202.13 and Germany’s DAX 30 climbed 3.2% to 4722.34. France’s CAC 40 rose 2.3% to 3052.08.

Anglo American Plc rose 2.7% after the Observer reported that Xstrata may offer a cash payment of as much as 5 billion pounds to convince Anglo American’s investors to consider its merger proposal.

Royal Philips Electronics NV rose 7.3% after unexpectedly posting a second-quarter profit of 44 million euros.

The US dollar and the yen weakened against the euro as the rally in stocks spurred investors to seek high yielding assets.

The yen traded at 129.95 against the euro from 129. The dollar weakened to $1.3985 per euro from $1.3936. The yen slipped to 92.88 per dollar from 92.54.

Crude oil climbed back above US$60 a barrel in New York as the rebound in stocks lifted optimism demand for fuel will rise and after rebels in Nigeria said they attacked a facility used by oil tankers in Lagos.

Crude for August delivery rose 1.3% to US$60.67 a barrel on the New York Mercantile Exchange.

Gold rose as the greenback weakened, stoking demand for the precious metal as an alternative investment.

Gold futures for August delivery advanced 1.1% to US$922.50 an ounce in New York.

Businesswire.co.nz

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