US mkts surge on Citigroup outlook; Dow ends up 379 pts

Source - Moneycontrol

US markets rallied the most on Tuesday, rebounding off 12-year lows to score their best day in more than three months. The move came after Citigroup said it was having its best quarter since 2007, spurring speculation that the worst of the banking crisis is over.

Citigroup outlook

Citigroup CEO, Vikram Pandit said Citi made $8 billion pre-tax profit in first 2 months of 2009 while the company made $37.50 billion loss in previous 15 months. The stock jumped 13%.

Bank-fuelled rally

JPMorgan Chase climbed 23% and Bank of America surged 28%, as Ben Bernanke urged an overhaul of financial regulations and Ben Bernanke said that if banking system stabilises, US could exit recession in 2009.

Larry Kantor, Head-Research, Barclay's Capital said, "I think part of this is just a bounce because things are just so bad. The news about the possible resumption of the uptick rules are a very big plus but in the meantime, the economy, nobody's paying attention to it. There are some very early signs that maybe things are getting better."

"The main thing is that output right now is falling a lot faster than demand, seeing consumption, and retail levelling out at very low levels. But production is way below that. So you are setting yourself up for a bit of a bounce just because inventories are going so low", he said.

The Dow Jones gained a whopping 5.85%, to close at 6,926. The S&P 500 rose 6.4%, to close at 720 while the Nasdaq jumped 7.1%, ending at 1,358.

Mathew Ziehl, RS Investments said, "Ultimately the economy will go the way the consumer goes. Consumers in more than 2/3rds of the companies are still losing jobs at accelerating rates. We need financial stabilisation and that's why I think the markets rallied so hard today. Market is desperate for some indication, some inkling of financial stabilisation. So employers can get a little confidence back. So, they can stop firing people and maybe some day even hiring them back."

Crude oil settled below USD 46 a barrel on Tuesday as the US government revised down its forecast for world oil demand in 2009. Oil prices have fallen $100 from last July as the global economic meltdown has eaten into world energy demand.