Dow up 200 as Citi lifts stocks
Markets boosted after troubled bank says it was profitable in the first two months of the year. Bernanke comments also in focus.
NEW YORK (CNNMoney.com) -- Stocks rallied Tuesday morning after Citigroup said it was profitable in the first two months of the year, and Federal Reserve Chairman Ben Bernanke spoke of the need for an overhaul of the financial system.
The Dow Jones industrial average (INDU) gained 213 points, or 3.3%, after ending the previous session at its lowest point since April 15, 1997.
The S&P 500 (SPX) index gained 25 points, or 3.7% after ending the previous session at the lowest point since Sept. 12, 1996.
The Nasdaq composite (COMP) climbed 50 points, or 4%, after ending the previous session at its lowest point since Oct. 9, 2002.
On Monday, stocks fell as worries about the global recession trumped Merck & Co. (MRK, Fortune 500)'s $41 billion purchase of fellow drugmaker Schering-Plough Corp. (SGP, Fortune 500)
But stocks managed to bounce back Tuesday after Citigroup (C, Fortune 500) Chief Executive Vikram Pandit said in a letter to employees that the troubled bank was profitable in the first two months of the year. The letter, filed with the Securities and Exchange Commission, expressed confidence about the bank's strength after internal stress tests.
"It's definitely helping out a little bit this morning," said Todd Leone, head trader at Cowen & Co.. He said that the markets are overdue for a rally anyhow, since they didn't post one Monday following the positive news of the Merck-Schering merger.
Citigroup's (C, Fortune 500) stock jumped 23% in early trading.
In other news, United Technologies (UTX, Fortune 500) said it was cutting its its 2009 profit target by 13% and would eliminate 11,600 jobs. Shares rose 3% in early trading.
The economy: Federal Reserve chairman Bernanke addressed the Council on Foreign Relations in Washington before the markets opened.
"In the near term, governments around the world must continue to take forceful and, when appropriate, coordinated actions to restore financial market functioning and the flow of credit," said Bernanke, adding that the U.S. government has already taken such steps and is prepared to do again, as necessary.
On the downside, Bernanke also said he would not support the suspension of the mark-to-market rule, an accounting rule that many think has exacerbated the credit crisis. A House panel hears testimony on mark-to-market accounting Thursday.
"What is necessary for confidence to return in the marketplace is a host of positive statements, beginning with Mr. Obama on down," said Peter Cardillo, chief market analyst for Avalon Partners.
The January wholesale inventories report comes out shortly after the market opens. Inventories are expected to have fallen 1% in January, according to a consensus of economist opinions compiled by Briefing.com. This is compared to a decline of 1.4% in the prior month.
Companies: Grocery store chain Kroger (KR, Fortune 500) reported earnings of 53 cents per share for the fourth quarter. That was slightly higher than the 7% gain to 52 cents per share projected by a consensus of analysts compiled by Thomson Reuters.
Kroger's stock bumped up slightly in pre-market trading.
Other markets: Oil prices gained 97 cents to $48.04 a barrel. The dollar slipped versus the euro, the yen and the British pound, after rallying on Monday.
The Asian markets closed mixed, with Tokyo's Nikkei index down 0.4% to a new 26-year low, but Hong Kong's Hang Seng index rallied 3%. The European indexes were higher in afternoon trading. 
