Tuesday Market Recap: Broad Rally On Hope Other Banks Will Follow Citigroup To Profit

The markets experienced what many argue is just a bear bounce and not a total rebound today as the Dow Jones Industrial Average (^DJI) closed up 5.8% while the NASDAQ (^IXIC) was up 7.1%.  The S&P 500 (^GSPC) exhibited a surge too on talks that Barney Frank is reinstating the uptick rule within a month to close up 6.4%. Crude oil closed down at $45.72 while gold settled at $897.30. The 10 year ended at 2.99% as investors sold out for the risk free asset .  All sectors performed extremely well, led by the banks who rallied off great news from Citigroup’s (C) Vikram Pandit sending shares to close at $1.43.

This morning, Citigroup CEO Vikram Pandit released an internal memo stating that the battered bank has raked in $19 billion worth of revenues the first two months of 2009 while turning a net profit for the first time since the middle of 2007. The memo argued that Citi’s current share price is not reflective of the bank’s value or it’s future earnings potential. Pandit also said that many assets will be fully collectible, including $44 billion worth of tax-related assets. This announcement by Citi caused investors to put money back into other financial entities, arguing that the likes of Goldman Sachs (GS) and Morgan Stanley (MS) are probably making more money than previously thought due to their superior health when compared to their competitors.

In the M&A space, Dow Chemical (DOW) and Rohm & Haas (ROH) settled their merger at one dollar higher than the original $78 per share contingent on Rohm & Haas’ two largest shareholders rolling over their shares to perpetual preferred shares. The Street sees this as a good sign for both sides, assuming that Dow executives got what they wanted even though the price of the deal was not reduced.

Overall, the market experienced a great day across all sectors and industry groups. It is important to not be enticed to buy in as prices rise, but to dollar cost average in over a period of time. This most likely is just a small rally as the markets work to digest all information both good and bad before allowing the bulls to take over.

That is all for the market recap today, catch us tomorrow for (hopefully) another up day.

Disclosure: The mutual fund the author manages is long GS.

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