Banks boost Wall Street
Investors cheer new lifeline government extends to Bank of America, despite massive losses at that bank and Citigroup.
NEW YORK (CNNMoney.com) -- Stocks rallied Friday morning after the government bailed out Bank of America and Citigroup announced plans to split its business in two, overshadowing massive quarterly losses at both banks.
The Dow Jones industrial average (INDU) added 1% in the early going. The Standard & Poor's 500 (SPX) index gained 1.3% and the Nasdaq composite (COMP) rose 1%.
"I think that everybody is feeling much better that the government is willing to lend as much as they have to and they're not balking at any number," said Anthony Conroy, head trader at BNY ConvergEx. "It seems like they're willing to do everything in their power to keep everything fine."
But Conroy added, "When you really take a step back, it's not really all that positive. It is the worst start to a year ever."
Bank of America: Bank of America (BAC, Fortune 500) received a $20 billion capital injection from the Treasury Department, along with guarantees on $118 billion of assets at the bank. (Full story)
The bank, run by CEO Ken Lewis, has been struggling to absorb its recent purchase of Merrill Lynch.
Bank of America also reported a net loss of $1.8 billion for the fourth quarter. For all of 2008, the bank managed to squeak out a profit of $4 billion, which is less than one-third of its $15 billion net income from 2007.
Bank of America blamed "escalating credit losses" as well as writedowns and trading losses in capital markets. The bank also reported that Merrill Lynch, which it acquired on Jan. 1, lost more than $15 billion in the fourth quarter. Shares were little changed Friday.
Also on Friday, Citigroup (C, Fortune 500) reported a fourth-quarter net loss of about $8.3 billion, or $1.72 per share, blaming writedowns and losses in securities and banking, as well as "higher credit losses."
For the full year 2008, Citigroup reported a net loss of about $18.7 billion, or $3.88 per share.
The bank also said it was splitting into two parts: Citigroup, to handle traditional banking, and Citi Holdings, to manage the riskier assets. Shares gained 5.5% Friday morning.
JPMorgan Chase (JPM, Fortune 500) said Thursday its profit sank 76% in the latest quarter. Shares fell 2% Friday morning.
Tech: Intel (INTC, Fortune 500) reported a 90% drop in fourth-quarter earnings after U.S. markets closed Thursday. The dismal results were in line with Wall Street's reduced expectations.
World markets: Stocks in Asia advanced, with Japan's Nikkei gaining 2.6%. European shares rallied, with markets in London, Paris and Frankfurt all posting gains in afternoon trading.
Oil and money: Oil rose 95 cents to $36.35 a barrel on the New York Mercantile Exchange. The dollar was lower versus the euro and the British pound, but higher against the yen. 
