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By Rita Nazareth and Lynn Thomasson

 

March 10 (Bloomberg) — Stocks around the world staged the biggest rally of the year after Citigroup Inc. said it was having its best quarter since 2007, spurring speculation the worst of the banking crisis is over. Treasuries and gold fell.

 

Citigroup jumped 35 percent as Chief Executive Officer Vikram Pandit wrote in an internal memorandum that the bank, which reported five straight quarterly losses, was profitable in the first two months of 2009. JPMorgan Chase & Co. climbed 18 percent and Bank of America Corp. surged 25 percent as Federal Reserve Chairman Ben S. Bernanke urged an overhaul of financial regulations. General Electric Co. rose as much as 21 percent, its steepest intraday advance since at least 1980.

 

“If we’re not at a bottom, we’re a pretty close,” said Michael Binger, Minneapolis-based fund manager at Thrivent Asset Management, which oversees about $60 billion. “It’s time to start putting money into stocks. Stocks are cheap and worldwide stimulus will eventually help lift earnings.”

 

The Standard & Poor’s 500 Index rebounded from a 12-year low, increasing 4.7 percent to 708.5 at 2:50 p.m. in New York. The Dow Jones Industrial Average added 265.2 points, or 4.1 percent, to 6,812.2. The MSCI World Index of 23 developed markets rose 4.3 percent. The S&P 500 and Dow posted their best intraday gains since November, while the MSCI World had its steepest since December.

 

‘Heal Up’

 

The S&P 500 Financials Index, which sank to an almost 17- year low on March 6, rebounded 13 percent today. The gauge of 81 banks, insurers and investment companies has lost 82 percent since its February 2007 record. U.S. government programs meant to stabilize the banking system have totaled $11.6 trillion in the past 19 months. The funding may spark a rebound in stocks through April, investor Marc Faber told Bloomberg Television yesterday.

 

“The system continues to heal up, which is good for stocks,” said Peter Sorrentino, who helps manage $15.5 billion at Huntington Asset Advisors in Cincinnati. “The fact that they’re trying everything they can to make the system reliable helps dissuade fears, bringing people back into the market.”

 

The VIX, as the Chicago Board Options Exchange Volatility Index is known, dropped 11 percent to 44.27. The index measures the cost of using options as insurance against declines in the S&P 500.

 

‘Disappointed’

 

Citigroup, which has been rescued three times by the government, surged 35 cents to $1.42. JPMorgan rallied $2.86 to $18.76. Bank of America, the nation’s biggest bank by assets, advanced 95 cents to $4.70. Wells Fargo & Co. climbed 15 percent to $11.43.

 

Citigroup’s Pandit said the company was profitable in January and February and he was “disappointed” with the current share price, which he said was based on misconceptions about the bank and its financial position.

 

The bank, once the world’s biggest by market value, fell below $1 for the first time last week as investors lost confidence that the company can recover from five quarters of losses totaling more than $37.5 billion.

 

“You have to be a little suspicious of what these major financial leaders say because some of the things they’ve said in the past haven’t been forthcoming,” said Randy Frederick, director of trading and derivatives at Charles Schwab & Co. in Austin, Texas. “Citigroup is the poster child for this whole financial meltdown.”

 

A revamp in regulation for the financial industry would help smooth out its boom-and-bust cycles, Bernanke said. He recommended lawmakers and supervisors rethink everything from the amounts firms set aside against potential trading losses and deposit-insurance fees to protections for money-market funds.

 

‘Flow of Credit’

 

“Governments around the world must continue to take forceful and, when appropriate, coordinated actions to restore financial market functioning and the flow of credit,” Bernanke said in remarks prepared for an address to the Council on Foreign Relations in Washington. “Until we stabilize the financial system, a sustainable economic recovery will remain out of reach.”

 

The U.S. Securities and Exchange Commission may consider at a meeting next month that the so-called uptick rule, which aimed to curb speculators who seek to drive down stock prices, be reinstated. The rule bars investors from betting against a stock until it sells at a higher price than the preceding trade.

 

General Electric advanced 20 percent to $8.87 and rallied as much as 21 percent, the most intraday since at least 1980. The cost to protect against a default by its finance arm fell to the lowest in seven days after the company yesterday sold $8 billion of government-backed debt.

 

European Banks Gain

 

A gauge of European banks posted the biggest advance among 19 industry groups in the Stoxx 600, adding 13 percent. Barclays Plc gained 9.9 percent on speculation it has sufficient capital and won’t need to use the government’s asset protection program.

 

Copper rose, driving up shares of its producers, on speculation China imported more metal last month and after stockpiles in warehouses monitored by the London Metal Exchange shrank for a ninth consecutive day.

 

Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper producer, advanced 4 percent to $33.61.

 

United Technologies Corp. increased 8 percent to $40.47. The maker of Otis elevators and Carrier air conditioners plans to cut 11,600 jobs as the weakening economy leads to lower sales and profit than previously projected.

 

The U.S. jobless rate will reach 9.4 percent this year and remain elevated through at least 2011, a monthly Bloomberg News survey indicated.

 

Office Depot Rallies

 

Office Depot Inc. had the biggest gain in the S&P 500, surging 42 percent to 84 cents. The world’s second-largest office-supplies retailer said that first-quarter earnings before interest and taxes will be “significantly better” than the previous period.

 

AT&T Inc. led a gauge of telecommunications companies in the S&P 500 up 4.9 percent, the steepest rally in three months. The second-largest telephone company advanced 5 percent to $22.81 after the Federal Communications Commission rejected M2Z Networks Inc.’s application for a license to operate a free nationwide wireless network.

 

AT&T also said it plans to spend more than $17 billion in 2009, mainly on expanding its networks. Almost 3,000 jobs will be added this year, the company said in a statement.

 

Rohm & Haas Co. added 5.2 percent to $77.81. Dow Chemical Co., the largest U.S. chemical maker, agreed to complete its $15.3 billion buyout of rival Rohm & Haas by April 1 to settle a lawsuit. Dow rose 5.1 percent to $6.65.

 

Treasuries fell, sending yields on 10-year bonds up 0.11 percentage point to 2.97 percent. Gold futures retreated 2.5 percent to $895 an ounce, a one-month low, as the rally in equities reduced the appeal of the precious metal as an alternative investment.

 

To contact the reporters on this story: Rita Nazareth in New York at nazareth@bloomberg.net; Lynn Thomasson in New York at lthomasson@bloomberg.net.

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