Wall Street moves higher on Citi, BofA plans
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NEW YORK: A relieved Wall Street advanced Friday as investors focused on big banks' plans to fix their balance sheets and took in stride billion-dollar losses reported by Bank of America Corp. and Citigroup Inc.
Investors shook off the big banking companies' multibillion dollar fourth-quarter losses and focused on actions that will affect their future profitability.
Citigroup, among the hardest hit by the ongoing credit and mortgage market turmoil, said it will split its operations in two, separating its traditional banking business from the company's riskier assets. The move by Citi follows a deal earlier in the week to sell control of its brokerage business to Morgan Stanley as it looks to streamline operations and shed assets.
Citi said it lost $8.29 billion, or $1.72 per share, during the final three months of the year.
Bank of America said it lost $2.39 billion, or 48 cents per share. That news came hours after Bank of America agreed on a deal to receive an additional $20 billion in support from the government. The bank will also receive guarantees to cover up to $118 billion in losses on loans and securities backed by residential and commercial real estate as it incorporates recently acquired Merrill Lynch & Co. into its operations. Bank of America's deal with the government is similar to one Citigroup reached with the government last fall.
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Citi rose 29 cents, or 7.6 percent to $4.12. Bank of America shares fell 9 cents to $8.23.
In morning trading, the Dow Jones industrial average rose 48.74, or 0.59 percent, to 8.261.23. The Standard & Poor's 500 index gained 5.07, or 0.60 percent, to 848.81, while the Nasdaq composite index rose 7.85, or 0.52 percent, to 1,519.69.
The market showed little reaction to the government's latest reports showing the economy remains weak.
The Labor Department said the consumer price index fell 0.7 percent in December as energy prices slid. Economists polled by Thomson Reuters forecast a 0.9 percent drop.
For the full year, prices rose just 0.1 percent — the smallest gain since prices actually fell in 1954.
Meanwhile, the Federal Reserve said industrial production from the nation's factories, mines and utilities fell a larger-than-expected 2 percent in December. Economists expected a 1 percent decline.
Advancing issues outnumbered decliners by about 4 to 1 on the New York Stock Exchange, where volume came to 319.5 million shares.
The Russell 2000 index of smaller companies rose 1.96, or 0.42 percent, to 464.58.
Meanwhile, oil prices rose 67 cents to $36.07. The dollar mostly fell against other major currencies, while gold prices rose.
Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.36 percent from 2.20 percent late Thursday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.11 percent from 0.10 percent late Thursday.
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