Stocks on Wall Street recorded a strong rise on Monday after the government announced it would guarantee $306 billion of troubled assets on Citigroup’s balance sheet, with the Dow Jones index gaining more than 300 points in the first two hours of trading.
Citigroup’s stock, which lost more than 60 percent of its market value last week, rose by $2.61 or 69 percent, to $6.38 following the announcement of the government’s aid package, which includes $20 billion in fresh capital from the Treasury Department for the repurchase of the bank’s preferred shares. JPMorgan Chase’s stock rose by 5.2 percent and Bank of America by 11 percent, after government guarantees eased concerns that investors would start pulling money out of Citigroup, destabilizing the banking giant with over $2 trillion in assets and operations in more than 100 countries. Shares of Alcoa Inc. and Microsoft Corp. rose by more than 4.5 percent based on speculation that new incentives would spur economic growth.
In mid-morning trading on the New York Stock Exchange (NYSE), the Dow Jones index rose by 317.00 points, or 3.94 percent, to 8,363.42 points. The broader Standard & Poor’s 500 index rose by $35.29 or 4.41 percent, to $835.32, while the technology index Nasdaq rose by 60.83 points or 4.39 percent, to 1,445.18 points. Bond prices on Monday showed fluctuations as investors considered the government’s plan to rescue Citigroup. The yield on the 10-year Treasury bond, which moves in the opposite direction of price, rose to 3.29 percent, up from 3.20 percent on Friday. Demand for three-month Treasury bonds remains high, which is a sign of investor caution.
