Wells Fargo Gives Wall Street a Reason to Run

Wells Fargo Gives Wall Street a Reason to Run

By JACK HEALY and ERIC DASH
Published: April 9, 2009

Stock markets surged higher on Thursday after Wells Fargo, the nation’s largest consumer bank, said that it expected to report record profit for the first three months of the year, kindling hopes that financial companies may finally be closing the book on quarter after quarter of wrenching losses.

As financial stocks soared, the Dow Jones industrial average rose 225 points as trading near a close, crossing above 8,000 points. The broader Standard & Poor’s 500-stock index was 3.5 percent higher, increasing the gains of a bear-market rally that has lifted stocks more than 20 percent since it began one month ago. The technology-heavy Nasdaq rose 3.4 percent.

Just three months ago, Wells Fargo announced that it had lost $2.55 billion as the economy foundered and the bank absorbed billions of losses from the acquisition of the Wachovia Corporation. But a statement on Thursday, Wells Fargo said it expected to report $3 billion in profit for the first quarter of 2009, far exceeding Wall Street’s expectations, and said it was issuing mortgages at a fast clip.

Investors took the statement from Wells Fargo, whose shares gained 20 percent, as another harbinger that the tattered economy may be bottoming out.

Other major banks like Citigroup, JPMorgan Chase and Bank of America, which reported billions in losses last quarter, have said that they expected to be profitable this year, and wisps of less-bad data from the housing market, manufacturers and consumer surveys are giving rattled investors new hopes that a bottom is in sight.

But experts warn that corporate losses are simply radiating outward from financial firms to other corners of the economy, and they say the economy’s thin green shoots and bear-market gains could turn to dust if rising unemployment forces deeper, unexpected contractions in consumer spending and corporate profits.

Analysts expect that earnings for companies in the S.&P. 500 fell 37 percent in the first months of the year, and they say many of the losses will be borne by retailers, energy companies and businesses that make products like chemicals and building materials.

“What you’re now seeing is the nonfinancial segment really start to tail off,” said Nicholas Bohnsack, sector strategist at Strategas Research Partners.

Oil prices settled at $52.05 a barrel in New York trading, up $2.67.

In Asia, Japan’s Nikkei rose 3.7 percent after Japan announced its biggest-ever economic stimulus plan, a $154 billion package of subsidies and tax breaks that aims to stem a deepening recession in the world’s second-largest economy.

In Europe, the FTSE 100 in London gained 1.4 percent, the DAX index in Frankfurt rose 3 percent, and CAC-40 in Paris rose 1.8 percent.

http://www.nytimes.com/2009/04/10/business/10markets.html?_r=1&hpw