Wall Street moves higher on Citi, BofA plans

Stocks closed moderately higher Friday after initially sliding on concerns about continuing problems in the banking industry.

Citigroup and Bank of America posted multibillion-dollar losses for the fourth quarter, sobering reminders that the sagging economy is aggravating the problems that began with the mortgage crisis in 2007.

Still, the market drew some reassurance from the deal announced late Thursday allowing BofA to receive an additional $20 billion in capital from the Treasury Department. The government also agreed to share losses on as much as $118 billion of troubled loans and securities -- most of which the Charlotte, N.C., company took on when it acquired Merrill Lynch on Jan. 1.

The aid package is similar to one that Citigroup received in November.

Investors were also heartened by an announcement Friday by New York-based Citigroup, among the hardest hit by the credit- and mortgage-market turmoil, that it intended a mass divestiture of operations that would leave it with just its traditional banking business and investment bank. Earlier in the week, Citigroup, which agreed this week to sell a majority stake in its Smith Barney brokerage to Morgan Stanley, didn’t give a timetable for the sale or spin-off of other assets.

BofA shares tumbled 14%, while Citigroup lost 8.6%. An index of 24 banking stocks dropped 4.1%.

As financial shares slumped, consumer stocks such as Wal-Mart Stores, McDonald’s and Procter & Gamble posted gains, as did some tech stocks, including Intel and Microsoft.

The Dow Jones industrial average ended the day with a gain of 68.73 points, or 0.8%, to 8,281.22. At one point the blue-chip gauge was down 103 points.

The Standard & Poor’s 500 index rose 6.38 points, or 0.8%, to 850.12. Except for the financial sector, each of the index’s broad industry groups gained at least 1% on average.

The Nasdaq composite index rose 17.49 points, or 1.2%, to 1,529.33.

The Russell 2,000 index of smaller-company stocks rose 0.8%.

The major indexes were down for the week in response to weak economic data and fears that fourth-quarter earnings reports would point to a prolonged recession.

For the week, the Dow fell 3.7%, the S&P; 500 lost 4.5% and the Nasdaq skidded 2.7%.

Advancing issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange.

Crude oil for March delivery fell 97 cents Friday to settle at $42.57 a barrel on the New York Mercantile Exchange. The February oil contract, which expires Tuesday, rose $1.11 to $36.51 in very light trading.

The dollar fell against other major currencies, while gold prices rose.

Yields on Treasury securities gained. The benchmark 10-year T-note climbed to 2.3% from 2.19% late Thursday.