Wall Street rebounds after banks report big losses

NEW YORK — Wall Street has managed its second straight comeback, but the rebound was more a sign of the market's turmoil than strength.

Stocks closed moderately higher Friday after an erratic session that had investors tussling with concerns about the ongoing problems in the banking industry in response to more billion-dollar losses at Citigroup Inc. and Bank of America Corp. Yet investors were also heartened by plans for both banks to restore themselves to profitability, and they were also willing to place bets on a range of consumer and industrial stocks.

"It's that tug of war between problems and promise," said Alan Gayle, senior investment strategist at RidgeWorth Investments. "I think there is a bit of a sigh of relief that there is assistance coming for Citi and Bank of America, but it seems like there is an ongoing need for this assistance."

The companies' fourth-quarter losses — Citi said it lost $8.29 billion, while Bank of America lost $2.39 billion — were sobering reminders that the sagging economy is aggravating the problems that began with the mortgage crisis in 2007.

Still, the market drew some reassurance from the fact that Bank of America reached a deal late Thursday to receive an additional $20 billion in capital 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.

Meanwhile, Citigroup, among the hardest hit by the ongoing credit and mortgage market turmoil, said it plans to separate its traditional banking business from its riskier operations. Earlier in the week, Citi agreed to sell a majority stake in its brokerage business to Morgan Stanley as it looks to streamline and shed assets.

Amid the uncertainty about financials, investors were buying consumer stocks like Wal-Mart Stores Inc., McDonald's Corp. and Procter & Gamble Co. Some tech stocks were among the gainers, including Intel Inc. and Microsoft Corp. After two weeks of selling, many stocks are looking much more attractive.

According to preliminary calculations, the Dow Jones industrial average rose 68.73, or 0.84 percent, to 8,281.22. The Dow was down 103 points in early afternoon; on Thursday, it recovered from a 205-point loss to close up 12.35.

The Standard & Poor's 500 index rose 6.38, or 0.76 percent, to 850.12, while the Nasdaq composite index rose 17.49, or 1.16 percent, to 1,529.33.

The indexes were down for the week, the result of selling in response to weak economic data and fears that fourth-quarter earnings reports, which begin next week in earnest, will point to a prolonged recession.

Recent comments