By Adria Cimino
Jan. 16 (Bloomberg) -- U.S. stock-index futures advanced after the government gave further support to Bank of America Corp. in an effort to prevent the financial crisis from deepening and Citigroup Inc. said it will split in two.
Bank of America jumped 9.4 percent in pre-market trading in New York after getting a $138 billion government lifeline. Citigroup added 11 percent after announcing plans to form two new businesses and to split the units it wants to keep from other, “non-core” assets. Intel Corp. gained 3.8 percent as it said profitability may rebound after the first quarter.
Standard & Poor’s 500 Index futures expiring in March added 1.8 percent to 854.5 as of 12:28 p.m. in London, suggesting the benchmark will rebound from its worst ever start to a year. Dow Jones Industrial Average futures gained 1.7 percent to 8,300 and Nasdaq-100 Index futures increased 1.6 to 1,196.25.
“What’s reassuring is the U.S. government isn’t reluctant to offer funding,” said Alexandre Iatrides, a fund manager at KBL Richelieu, which oversees $5.3 billion in Paris. “The U.S. will rebound before Europe.”
Bank of America gained 9.4 percent to $9.10. The largest U.S. bank by assets posted its first loss since 1991 and cut its quarterly dividend to 1 cent a share from 32 cents after the government agreed to invest $20 billion more in the lender and guarantee $118 billion of assets to help it absorb Merrill Lynch & Co.
Bank of America’s fourth-quarter loss of $1.79 billion, or 48 cents a share, compared with net income of $268 million, or 5 cents, a year earlier. Citigroup analyst Keith Horowitz estimated on Jan. 11 that Bank of America would post a $3.6 billion loss.
Citigroup Loss
Citigroup, the financial services company whose shares have fallen 43 percent this year, advanced 11 percent to $4.26 in New York. The bank posted an $8.29 billion fourth-quarter loss, completing its worst year, as the credit crisis eroded mortgage- bond prices and customers missed more loan payments.
The net loss of $1.72 a share compared with a loss of $9.8 billion, or $1.99, a year earlier. The results included a $3.9 billion gain from the sale of a German consumer bank. Analysts, excluding the gain, estimated the company would report a loss of $1.08 a share, according to a survey by Bloomberg.
Stocks yesterday ended a whipsaw session higher after expectations grew that Bank of America would get more federal aid and Citigroup denied speculation the government planned to take over the bank.
Worst Start
The S&P 500 is off to its worst start to a year and is headed for its biggest weekly retreat since November after profits from Alcoa Inc. trailed estimates and investors speculated banks need capital. Since rallying 20 percent from its Nov. 20 low on speculation government spending would revive the economy, the Dow has dropped 9.1 percent over the last nine days.
Both indexes posted their biggest annual declines since the Great Depression in 2008, with the S&P 500 reaching an 11-year low of 752.44 and the Dow sliding to the lowest since 2003 on Nov. 20. Stocks tumbled as more than $1 trillion in bank losses froze lending and spurred a global recession.
A decline in U.S. stock indexes below the 2008 lows from November may trigger a rout that pushes benchmark averages to levels not seen since the mid-1990s, according to technical analysts Ralph Acampora and John Murphy. Should the Dow fall below the 7,552.29 it touched on Nov. 20, it might tumble to 6,000, Acampora, who retired from Knight Capital Group Inc. in October 2007 after four decades on Wall Street, said.
Cost of Living
Intel increased 3.8 percent to $13.80 in New York. The world’s biggest maker of semiconductors said profitability may rebound after the first quarter, when customers finish working through excess supplies. The company said revenue this quarter may be about $7 billion, without providing an official forecast.
The cost of living in the U.S. probably fell in December as the recession deepened, capping the first annual decline in a half century, economists said ahead of a government report today. Consumer prices probably dropped 0.9 percent last month, a third straight decline, according to the median estimate in a Bloomberg News survey. Other reports may show consumer confidence and industrial production weakened.
The Labor Department’s price report is due at 8:30 a.m. in Washington.
To contact the reporter on this story: Adria Cimino in Paris at acimino1@bloomberg.net.
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