Dow up 494 as Obama Prepares to Name Treasury Boss

In this file photo, people walk out of the Citigroup Center in New York. Citigroup Inc. said today...

In this file photo, people walk out of the Citigroup Center in New York. Citigroup Inc. said today it aims to shed about $500 billion in assets and grow revenue by 9 percent over the next few years, as it tries to rebound from massive losses tied to deterioration in the mortgage and credit markets.

(Mark Lennihan/AP Photo)

Wall Street put a stop to a terrifying decline and stormed higher Friday as President-elect Barack Obama appeared ready to tap the chief of the New York Federal Reserve as the next treasury secretary and hand him the herculean task of righting the U.S. financial system. The Dow Jones industrial average, which had broken even for the day until news of the nomination leaked about an hour before the close, raced upward and finished 494 points higher, a rally of more than 6 1/2 percent.

The outbreak of buying pushed the Dow above 8,000 — a figure that would have seemed like a nightmare three months ago but on Friday was a relief for Americans who have watched their investments and retirement savings drain away with alarming speed.

In the two previous days, the Dow had lost a staggering 873 points, more than 10 percent of its value, and the broader Standard & Poor's 500 index had sunk to its lowest level since 1997.

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The turnaround came when word reached Wall Street that Obama was likely to nominate New York Fed president Timothy Geithner, 47, for treasury secretary. Geithner would assume top responsibility for tackling what threatens to be the deepest recession in a generation.

Financial markets despise uncertainty, and investors were looking for a clear message from Obama on who will make up his economic brain trust. Wall Street had been voicing increasing frustration with Henry Paulson, the current treasury secretary, over his erratic handling of the federal financial rescue system.

"Something needed to be done on the economy," said Ben Halliburton, chief investment officer at Tradition Capital Management. "The fact that they've got the team together, maybe that is going to shorten the period of indecision."

Elsewhere, the government continued its efforts to shore up the financial system. The Federal Deposit Insurance Corp. also said it would guarantee up to $1.4 trillion in U.S. bank debt for more than three years as part of the government's financial rescue plan.