US stocks staged a sharp recovery yesterday, helped by rebound in financial shares, as analyst Meredith Whitney’s bullish comments on Goldman Sachs (NYSE:GS) triggered a buying spree and investors snapped up banking and industrial stocks.The Dow Jones industrial average jumped 185 points.Bank of America (NYSE:BAC), which has been hit hard by loan losses, also surged after Whitney said on CNBC the shares were the cheapest among U.S. banking stocks.The S&P 500 index added 22 points, or 2.5%.The NASDAQ rose 37 points, or 2.1%, helped by a 2.1% rally in technology stocks.
However, CIT Group Inc. (NYSE:CIT) plunged 11.8% after the commercial finance lender said its failure would put prospects of 760 manufacturing clients in jeopardy and precipitate a crisis for about 300,000 retailers.American International Inc. (NYSE:AIG) rallied 24% and was the leading gainer among S&P 500 stocks after media reports said Primus Financial Holdings Ltd. is looking to make a $2 billion bid for the firm’s Taiwan life insurance unit.
Stock futures pared gains this morning, despite better-than-expected results from Goldman Sachs (NYSE:GS), as a government report said wholesale prices rose more than estimated in June.
Market breadth was positive. On the New York Stock Exchange, advancing shares beat declining issues five to one on volume of 1.19 billion shares. The market’s measure of volatility, the CBOE Vix, tumbled 9.3% to 26.31.Crude prices sank to an eight-week low, off $0.20 to $59.69.
All ten S&P500 industry groups recorded gains, led by a 5.9% rise in financial stocks.Financials rose, following Whitney’s “buy” rating on Goldman Sachs (NYSE:GS), that was issued a day before the firm reports its first-quarter earnings.Goldman Sachs (NYSE:GS) is expected to beat consensus estimates of earnings of $3.48 per share, helped by its lucrative bond trading operations.Bank of America (NYSE:BAC) jumped 9.3%, following Whitney’s comments.General Electric (NYSE:GE) surged 6.3% ahead of its earnings release on Friday, after Goldman Sachs (NYSE:GS) said the company is likely to beat Street projections.JP Morgan (NYSE:JPM), expected to report on Thursday, jumped 7.3% on expectations of better-than-projected earnings.
Yesterday’s Treasury Budget statement for June of a slightly less-than-expected, but still onerous $94.3 billion deficit, sent the year-to-date cumulative deficit to a record $1.08 trillion. Treasury Secretary Geithner, however, countered suggestions of additional programs, noting, “…we’re just beginning to come to the point when you’re going to see the largest effective boost to the employment-intensive parts of the stimulus coming on stream,” as he stated, “…we’re starting to see a better basis for recovery.”
Company earnings reports slated for release today include: Altera Corp (NASDAQ:ALTR), Goldman Sachs (NYSE:GS), Intel (NASDAQ:INTC), Johnson & Johnson (NYSE:JNJ) and Yum! Brands (NYSE:YUM).
