Banks Lead Wall Street RallyNews of IBM's earnings report and a rebound in buying of bank stocks rallied Wall Street investors, and the market regained most of its previous losses on Wednesday.
Treasury Secretary nominee Timothy Geithner's appearance yesterday before the Senate panel that that confirmed his nomination today also buoyed investors.
The Dow Jones industrial average gained 3.5 percent and climbed above the 8,000 mark. Standard & Poor's 500 index also rose 4.4 percent, and the Nasdaq composite added 4.6 percent.
Geithner's hearing focused on what action he proposes to take to help the country pull out of the financial crisis and economic recession. He says if confirmed he will reform the Troubled Asset Relief Program, the government's $700 billion bank rescue plan that has many critics. Geithner also offered his apologies for underpaying past taxes, but says his error was unintended.
The markets opened lower today with the Dow down 147 points in the opening hour, as computer software giant Microsoft announced it will cut up to 5,000 jobs and posted lower earnings that miss estimates.
Thain Out At Bank of America
The news that former Merrill Lynch CEO John Thain resigned from Bank of America (BAC) today should come as no surprise to those who have followed the Merrill-Bank of America merger mayhem that has caused Bank of America many headaches. As head of Merrill Thain mover up its yearend bonuses and paid them out in December just before the final acquisition was made.
Bank of America issued a statement about Thain's leaving saying Bank of America Chairman and CEO Ken Lewis flew to New York to talk to John Thain. It was mutually agreed that Thain's situation was not working out and he would resign.
Merrill Lynch executives were also paid out bonuses at the same it reported a $15.45 billion fourth-quarter loss. This loss caused Bank of America to ask for $20 billion more from the government's bailout fund. Merrill also had received bailout funds. Bank of America acknowledged that it knew of Merrill's plans to move up the bonuses.
Citi Names New Chairman
Citigroup has named former Time Warner CEO Richard Parsons its chairman in a move to shake up the ailing mega bank's board of directors. Citi announced this month that it was splitting the company into two parts, and has received about $350 billion in government money and loan guarantees in the last six months.
Parsons succeeds Sir Winifred Bischoff. Parsons earlier had been CEO of New York-based Dime Bancorp. Parsons had been, until his appointment to Chairman, Citi's lead director.
The move to name Parsons CEO comes after the news that the bank posted an $8.3 billion loss in the fourth-quarter, adding up to an $18.7 billion net loss for the year. Citi's regulators had been pushing for Citi to make changes to its board. The split into two companies will separate the bank's core bank business from its other risky assets and operations.
Parsons joins CEO Vikram Pandit at the top of Citi's management. The bank is a shadow of what it was a year ago, with a market capitalization of $20 billion. The bank's stock rallied with a 31 percent increase on Wednesday.
County's Initial Jobless Claims Hit 26-Year High
The number of workers filing first- time claims for unemployment benefits tied a 26 year record last week, according to Labor Department reports. Initial jobless claims increased by 62,000 to 589,000, more than the forecasts predicted. These numbers were higher than a revised 527,000 in the prior week. Companies cut 2.6 million jobs last year, and may continue to let workers go amid a deepening recession.
President Barack Obama's stimulus plan calls for the creation or saving of up to 4 million jobs. Economists are predicting that job losses will continue through the first part of 2009 and may extend through the end of the year, as consumers and businesses alike have cut spending drastically.
New Home Construction Hits Record Low
New home housing permits and starts his a record low in December, dropping to the lowest numbers since the data has been recorded. Housing permits fell 10.7 percent from November to an annual rate of 549,000, according to Commerce Department reports, and housing starts were down 15.5 percent from November to an annual rate of 550,000.
The reports were both much worse than expected; the Commerce Department expected that building permits would average out to 615,000 last year. Housing starts were expected to fall to 610,000 in December, down from a revised 651,000 in November.