US stocks enjoyed strong gains this week as a degree of confidence returned to Wall Street following the government rescue of Citigroup and fresh efforts by policymakers to encourage bank lending.
However, the week ended in muted fashion following the Thanksgiving break as investors looked to the start of the holiday shopping season for clues about the depth of the financial crisis.
All three broad market indices ended in positive territory on Friday with the S&P 500 notching up its fifth successive winning session, albeit with modest gains as many traders remained away from their desks.
Early reports suggested that sizeable crowds were gathering at stores around the country on Black Friday, the traditional start of the holiday shopping period.
Citigroup’s rescue by the government at the start of the week led to steep gains for the financial sector. Citigroup shares ended the week up 122 per cent at $8.36.
“There appears to be a greater sense of confidence these days about the survival of Citigroup now that the government has ring-fenced more than $300bn of its toxic mortgage debt,” said Andrew Wilkinson, senior market analyst at Interactive Brokers.
Meanwhile, the Federal Reserve further helped sentiment as it pledged $800bn to bolster markets for loans to homebuyers, small businesses and consumers.
The equity market also responded positively to President-elect Barack Obama’s announcement of the economic team that will attempt to tackle the financial crisis.
A wave of largely disappointing economic data through the week was largely shrugged aside.
The commerce department said orders for durable goods decreased 6.2 per cent last month, the largest tumble in two years.
Consumer spending plunged by 1 per cent last month, which was worse than expected. But personal incomes were up 0.3 per cent last month, slightly better than the 0.1 per cent gain analysts had expected.
At the close in New York on Friday the S&P 500 index was up 1 per cent for the day and 12 per cent for the week at 896.23, while the Nasdaq Composite was 0.2 per cent higher on the day and 10.9 per cent up for the week at 1,535.57. The Dow Jones Industrial Average was 1.2 per cent higher for the day and 9.7 per cent for the week at 8,829.04.
The S&P Financials index rallied sharply through the week after the rescue of Citigroup, ending the week up 31.4 per cent at 170.
JPMorgan Chase rose 39.3 per cent to $31.66 and Bank of America 41.7 per cent to $16.25, while Morgan Stanley rose 46.8 per cent to $14.75 and Goldman Sachs was 48.2per cent higher at $78.99.
In corporate news, American International Group said it would receive a $40bn capital infusion from the Treasury in exchange for preferred stock under the Troubled Assets Relief Programme (Tarp).
AIG shares were 25.6 per cent higher at $2.01.
E Trade Financial, the online brokerage company, said it was continuing to work with regulators through its application for the Tarp scheme. Its shares soared 50 per cent to $1.35.
Luxury jeweller Tiffany reported a 57 per cent slide in quarterly profit, cut its outlook for the year and said it planned to shed staff. Its shares rose 1.6 per cent to $19.79.
DR Horton shares rose 58.3 per cent to $6.87 after it reported a fiscal fourth quarter loss of nearly $800m on slower home sales, but still beat expectations.
Research in Motion was among the relatively few stocks that fell through the course of the week, ending down 5.2 per cent at $42.47 on a research note saying it may sign up fewer subscribers than expected in November due to short supply of its Storm handset.
In mergers and acquisitions news, BHP Billiton dropped its Rio Tinto take-over bid because of the deteriorating economy. BHP was up 37.4 per cent at $40.02.
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