U.S. Stock Futures Rally, Extending Global Surge; Banks Soar

By Henrietta Rumberger

Sept. 19 (Bloomberg) -- U.S. stock futures surged, indicating the Standard & Poor's 500 Index will extend its biggest rally in six years, as U.S. Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke put together plans to halt the credit-market seizure.

Citigroup Inc. climbed 21 percent, Goldman Sachs Group Inc. jumped 26 percent and Morgan Stanley added 34 percent after Paulson and Bernanke proposed moving troubled assets from the balance sheets of financial companies. Washington Mutual Inc., the savings and loan that put itself up for sale, gained 37 percent following a temporary Securities and Exchange Commission ban on short selling of financial company shares.

Stocks in the U.S. surged yesterday on prospects the government would offer a proposal to shore up markets, while regulators and pension funds took steps to curb bets against banks and brokerages. The S&P 500 is still down 3.6 percent this week after Lehman Brothers Holdings Inc. filed for bankruptcy and the government took over American International Group Inc.

``The SEC's decision on short selling and the government intervention help the market fly,'' Tilmann Galler, a client portfolio manager who helps oversee about $25 billion at JPMorgan Asset Management in Frankfurt, said in a Bloomberg Television interview. ``The panic of the past days will be corrected to some extend in the next few days.''

S&P 500 futures expiring in December climbed 45.4 points, or 3.8 percent, to 1,248.6 as of 8:04 a.m. in New York. Dow Jones Industrial Average futures gained 318 to 11,303, and Nasdaq-100 Index futures increased 47 to 1,755.5.

Europe, U.K. Surge

Europe's Dow Jones Stoxx 600 Index rose the most since data for the index began in 1987, adding 7 percent, while the U.K.'s FTSE 100 Index posted a record gain of 8.3 percent. Russia's RTS Index jumped 20 percent after a two-day suspension and President Dmitry Medvedev's pledge of $20 billion to prop up the market.

The 26 percent drop in the S&P 500 since its October peak through Sept. 17 erased half its gain from the five-year bull market that began in 2002. Twice this week the index lost 4.7 percent, the biggest single-day slumps since the September 2001 terrorist attacks. The S&P 500 is still poised to post its first yearly retreat since 2002 after global banks racked up $516 billion in credit losses and asset writedowns stemming from the first nationwide decline in home prices since the 1930s.

Removing Troubled Assets

Paulson and Bernanke proposed moving troubled assets from the balance sheets of American financial firms into a new institution. Congressional leaders said they aim to pass legislation soon. The initiative, which may insure money-market funds, is aimed at removing devalued mortgage-linked assets at the root of the worst credit crisis since the Great Depression.

Citigroup rose $3.50, or 21 percent, to $20.15, Goldman Sachs jumped $28.01, or 26 percent, to $136.01 and Morgan Stanley increased $7.65, 34 percent, to $30.20. Washington Mutual surged $1.10, or 37 percent, to $4.09. JPMorgan Chase & Co. added $4.70, or 12 percent, to $45.

Goldman and Morgan Stanley, Wall Street's biggest remaining independent securities firms, are seeking to avoid the sort of run on their shares that triggered emergency sales of Merrill Lynch & Co. and Bear Stearns Cos., and the Sept. 15 bankruptcy by Lehman.

The SEC temporarily banned short-selling in shares of 799 financial companies to curtail the market rout.

Morgan Stanley's Chief Executive Officer John Mack told employees this week investors betting on a decline in the firm's shares are ``driving our stock down.'' The company yesterday snapped seven days of losses, rising 3.7 percent. Speculation the bank may merge with Wachovia Corp., the fourth-biggest U.S. bank, also boosted the shares.

Databases, Renewals

Oracle Corp. advanced $1.75, or 9.3 percent, to $20.50. The second-largest software maker posted earnings that topped analysts' projections by 4.9 percent as clients bought more database programs and renewed contracts for upgrades.

Oil rose for a third day, following equities higher as government measures to resolve the bank crisis drew investors back to financial markets. Crude for October delivery gained 2.4 percent to $100.25 a barrel on the New York Mercantile Exchange.

Exxon Mobil Corp., the world's biggest oil company, rose 1.4 percent to $78.87. Chevron Corp. climbed 2.2 percent to $84.68. Halliburton Co., the world's second-largest oilfield services provider, increased 2.5 percent to $35.50.

To contact the reporter on this story: Henrietta Rumberger in Frankfurt at hrumberger@bloomberg.net.