While you were sleeping: Wall St extends rally; Citigroup result

Monday 20th April 2009

U.S. stocks gained on Friday, with the Standard & Poor’s 500 extending its rally through a sixth week amid optimism the economic slump is abating after companies including Citigroup and General Electric posted better-than-expected earnings. Helping lift sentiment, the Reuters/University of Michigan consumer confidence survey showed Americans are at their most confident since before the collapse of Lehman Brothers.

The preliminary April reading of consumer sentiment rose to 61.9 from 57.3 in March, reaching the highest since September. The index of consumer expectations rose to 58.9 this month from 53.5 in March.

And Frank Nothaft, chief economist at Freddie Mac, the second-largest provider of mortgage financing in the US, while there are more home-loan delinquency risks ahead as unemployment soars, house sales are now nearing their bottom.

Citigroup snapped five quarters of losses with a first-quarter profit of US$1.6 billion profit on trading returns and an accounting gain. The lender posted a per-share loss of 18 cents on costs of its preferred dividends. Citigroup’s shares slipped 9% to US$3.65, leading decliners on the Dow Jones Industrial Average. American Express led the Dow higher, climbing 5.4% to US$21.81. Bank of America, which is scheduled to post its results on Monday in the U.S., gained 2.5% to US$10.60.

The Dow edged up 5.9, or 0.1%, to 8131.33 and the S&P 500 rose 0.5% to 869.60.

The Nasdaq Composite advanced 0.2% to 1673.07 as Apple rose 1.6% to US$123.42 ahead of its quarterly results this week. Google, which last week posted earnings which beat estimates, climbed 0.9% to US$392.24.

McDonald’s Corp. rose 2.5% to US$56.09 after the company said there are signs the economic situation is getting less worse.

GE climbed about 1% to US$12.39 after posting a 36% decline in first-quarter profit. Per-share earnings were a better-than-expected 26 cents. Revenue declined 9%.

The company said its GE Capital would be profitable this year. Chief Executive Jeff Immelt told analysts that the economy “remains tough.”

General Motors fell 4% to US$1.86 and has dropped 25% in the past month. The Obama administration has instructed GM to prepare a restructuring plan that would use stock to pay off bondholders and the automaker's major union in exchange for $48 billion in debt, Reuters reported, citing people with knowledge of the plan.

The U.S. Treasury may also be willing to accept GM stock in payment for US$13.4 billion in emergency loans, the report said.

The U.S. dollar gained against the euro amid concern at divisions within the European Central Bank’s governing council over the direction of monetary policy.

The euro fell 1.1% to $1.3038 in last New York trading on Friday and weakened by 1.3% to 129.24 yen. The dollar slipped 0.2% to 99.13 yen.

ECB President Jean-Claude Trichet said at a media conference in Japan that a further “measured” cut in the benchmark interest rate was possible after the bank lowered the rate by 25 basis points to 1.25% this month. Still, a zero interest rate wouldn’t be appropriate for the ECB, he said.

The ECB has put off decisions on adopting so-called non-standard measures to revive the region’s economy amid division between its 22-strong council.

Government bonds in Europe tumbled on speculation better than expected earnings from Citigroup and GE signal the end may be coming to the U.S. downturn, helping lift equity markets worldwide.

The yield on the 10-year Bund rose 9.8 basis points to 3.279%. The yield on ten-year British gilts jumped 11 basis points to 3.35%.

Sony Ericsson, the world’s fourth-biggest mobile handset maker, on Friday said it will eliminate one in five jobs this year after posting a pretax loss of 370 million euros. Rival Nokia Oyj, the largest, also reported a loss last week.

The pan-European Dow Jones Stoxx 600 Index rose 1.6% to 196.96 on Friday, led by a 17% surge in the U.K.’s Lloyds Banking Group. Heidelberg Cement rose 16% and Daily Mail Trust was up 15%. Royal Bank of Scotland rose 14%.

The FTSE 100 rose about 1% to 4092.80 and Germany’s DAX 30 gained 1.5% to 4676.84. France’s CAC 40 rose 1.8% to 3091.96.

Copper futures for July delivery rose 0.8% to US$2.1975 a pound on the New York Mercantile Exchange. Gold for June delivery fell 1.4% to US$867.90 an ounce in New York.

Crude oil for May delivery rose 1.3% to US$50.65 a barrel on the New York Mercantile Exchange. The May contract expires on April 21.

Businesswire.co.nz

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