Higher open eyed on Citi rescue

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By Ellis Mnyandu

NEW YORK (Reuters) - Stocks headed for a higher open on Monday after the U.S. government agreed to pump $20 billion of new capital into Citigroup, averting a bank collapse that could have crippled the world's financial system.

Shares of Citigroup jumped more than 50 percent to $5.80 before the bell as investors welcomed the rescue of the No. 2 U.S. bank, whose shares last week plunged to their lowest levels in about 15 years amid a crisis of confidence.

It was the biggest bank bailout yet and a measure of the crisis sweeping the world.

The news lifted other financial shares. Bank of America was up 6.3 percent to $12.19, Morgan Stanley , up 7.5 percent to $10.80 and Goldman Sachs, rose 4 percent at $55.40.

The Citigroup rescue, along with Friday's news that President-elect Barack Obama would appoint current New York Federal Reserve Bank President Timothy Geithner as U.S. Treasury Secretary, underpinned positive sentiment.

The market is also anticipating details on Obama's plan for a two-year economic stimulus package involving the creation of 2.5 million jobs over two years.

"There's good momentum coming our way. A lot of the things we were concerned about needed answers," said Arthur Hogan, market analyst at Jefferies & Co in Boston.

"One of the things we needed an answer to was who was going to be the Treasury Secretary, and we got that on Friday. Another thing we needed an answer to was what we were going to do with Citigroup, and we got the answer to that last night."

S&P 500 futures rose 19.50 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures jumped 119 points, and Nasdaq 100 futures climbed 16.50 points.

But even with the positive momentum, there was likely to still be caution as the market tries to recover from 11-year lows and concern remains about the fate of the U.S. auto companies, including General Motors , which are seeking billions in government financial aid.

A report on October existing home sales, due at 10 a.m., could also show more deterioration in housing. In a bid to bring calm to the market, Obama is due to announce his economic leadership team at 12 noon on Monday.

Citigroup's rescue follows the disappearance or bankruptcies of such Wall Street names as Bear Stearns Cos, Lehman Brothers Holdings Inc and Washington Mutual Inc.

In addition to the new capital, Washington effectively guaranteed most of Citi's $306 billion losses on high-risk assets.

Energy shares, including Exxon Mobil, may get a boost from a 1 percent rise in crude oil prices to $49 a barrel, caused by the continuing economic doom.

(Editing by Kenneth Barry)

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