President-elect Barack Obama will name Timothy F. Geithner to be his Treasury Secretary, according to a knowledgeable Democrat, elevating a Treasury veteran who as president of the Federal Reserve Bank of New York has all year been at the center of the worsening economic crisis.

    Stocks jumped 300 points as news leaked Friday of the appointment, which Mr. Obama is expected to announce by Monday, along with the rest of his top economic advisers. The market's rise followed days of steep declines and worsening economic news that spurred the Obama transition offices in Washington and Chicago to expedite announcements about the incoming economic team in hopes of rebuilding confidence in the markets and among the public.

    Mr. Geithner, 47, for weeks has been the subject of speculation for the administration's top economic post, a job that has gained out-sized stature as the economy has weakened and the Treasury secretary has been put in charge of a $700 billion financial bailout program. His chief rival was his former boss at Treasury, Lawrence H. Summers, President Bill Clinton's final Treasury secretary.

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Stocks Soar on News of Choice for Treasury    •

    Mr. Summers is likely to be named as an economics adviser as well, two sources familiar with the Obama transition said, with the expectation that eventually he will be named to the Federal Reserve Board, perhaps as successor to Chairman Ben Bernanke.

    In choosing Mr. Geithner, Mr. Obama would signal both a change at Treasury as well as continuity in its economic rescue efforts that could reassure financial markets. With current Treasury Secretary Henry M. Paulson Jr. and Mr. Bernanke, Mr. Geithner, as chief of the Federal Reserve Bank in the city that is headquarters to the financial industry, has been part of a troika that has struggled this year to contain the credit crisis.

    "You can't bring in a guy who needs on-the-job training," said Kenneth S. Rogoff, a professor of economics at Harvard who once worked with Mr. Geithner at the International Monetary Fund. "You have to have someone who can hit the ground running."

    At the same time, Mr. Geithner's current links in the bailout to the two top economic appointees of outgoing President George W. Bush are offset by his close connections to the centrist Democratic policies of former President Bill Clinton and his best-known Treasury secretary, former Wall Street executive Robert E. Rubin. Mr. Geithner served under Mr. Rubin and Mr. Summers at Treasury in the 1990s, and rose to be undersecretary for international affairs.

    Rubin protégés in fact are likely to dominate the Obama economic team, to the certain dismay of some Democratic Party liberals and union leaders who disparage the Rubin faction's devotion to the goals of balanced budgets and free trade. In addition to Mr. Geithner and Mr. Summers, Mr. Obama will name as his budget director Peter R. Orszag, a Clinton administration economist and Rubin ally who is now head of the Congressional Budget Office.

    "I think Tim is a great choice for the job," said Paul Calello, chief executive of the investment bank at Credit Suisse. "He has the intellect, the experience and the ability to work across many constituencies that you need in that job. It's also important to note that Tim has both the domestic and international experience that is going to be very important going forward."

    Mr. Obama does not know either man well, but he knows Mr. Summers better since the former Treasury secretary was an occasional economics adviser to Mr. Obama during his presidential campaign and after the election was named to the president-elect's economic advisory board for the transition.

    But people close to Mr. Obama said he clicked with Mr. Geithner during a recent private meeting; the men are the same age and Mr. Obama is closer temperamentally to the low-key and almost boyish Mr. Geithner than to the more tightly wound Mr. Summers. Mr. Summers, who will be 54 on Nov. 30, is widely described by the same word - "brilliant" - but is also renowned for being arrogant, abrupt and at times difficult to work with as a result.

    As a special White House adviser to the president, however, Mr. Summers could have influence rivaling the Treasury secretary's own, especially if he is viewed by the markets in the United States and abroad as the nation's next central banker.

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Stocks Soar on News of Choice for Treasury

Saturday 22 November 2008

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by: Jack Healy,The New York Times

    After two days of punishing losses, Wall Street surged on Friday afternoon after news reports said that President-elect Barack Obama had tapped Timothy F. Geithner, the president of the New York Federal Reserve, to be secretary of the Treasury.

    Skittish financial markets closed dramatically higher following the reports, recouping some of the slide that brought them to 11-year lows. The Dow Jones industrial average soared 494.13 points or 6.5 percent, closing at 8,046.42. The broader Standard & Poor's 500-stock index swung 6.3 percent higher, or 47.59 points to 800.03. The Nasdaq composite was up 5.2 percent.

    "It was almost a Geithner relief rally," said Steve Neimeth, portfolio manager at AIG SunAmerica Asset Management.

    Bits of news have swung financial markets widely in recent weeks, and on Friday afternoon, traders seemed to rally behind unconfirmed reports that the country's next president had picked his chief financial officer. The markets were not applauding the choice specifically, said Ryan Larson, senior equity trader at Voyageur Asset Management, but any choice at all.

    "What you're seeing is a rally off the headlines," Mr. Larson said. "The markets are applauding change. It's a hope that change will bring some sort of effectiveness to these plans and ultimately make a road map to come out of it."

    Shares in all sectors closed higher, but basic-materials companies and energy producers led the day, lifted by a rise in commodities prices.

    No major economic reports, which have jolted markets all week, were released on Friday, and the Congressional lame-duck session paused as automakers retooled their case for a bailout. Early Friday, President Bush signed an extension of jobless benefits, which provides an additional three months for those whose unemployment benefits have run out or are about to expire.

    Earlier this week, Wall Street slid to its lowest point in 11 years after two days of fevered sell-offs effectively erased all the gains of the Internet and housing booms. The Dow closed near 7,500 points on Thursday, and the S.&P. was lower than any point since 1997.

    "It's not fun," said David Joy, chief market strategist of RiverSource Investments. "This is an environment like having a migraine headache every day. You know someday it'll end, but you don't know when, and the doctors can't help you."

    Investors pondered whether they could finally begin to return to equity markets after such a bloodletting, or whether markets would continue to fall through the end of the year as people cash out on redemption orders and sell their shares for tax purposes. Analysts said that large funds and institutional investors have reduced their stake in equity markets, and will probably continue to sit on piles of cash until 2009.

    "I think the rest of this year is over," said Eric Ross, director of United States research at Canaccord Adams.

    Indeed, an analysis released by Goldman Sachs found that hedge funds have reduced their stock holdings to 17 percent from 47 percent a year ago.

    While the rest of the market gained on Friday afternoon, shares of Citigroup lagged. The company's stock dropped below $4, after the bank denied reports that it could auction off its components, or put itself up for sale. Shares in Bank of America and J.P. Morgan, the nation's other largest banks, were also still down.

    A bounce in the price of commodities like metals, oil and gold after months of declines helped to push up shares in basic-materials companies. The aluminum manufacturer Alcoa was up 14 percent on Friday, leading the Dow, and mining companies posted double-digit gains. Gold was up more than 6 percent.

    Crude oil prices, which retreated in early trading, settled 44 cents higher, at $49.86. Energy shares, which have tumbled 50 percent this year, rebounded on Friday, with Exxon Mobil, Conoco Phillips and Chevron trading higher. The average price for gasoline fell below $2 a gallon nationwide, according to AAA, the auto association.

    But as demand for goods continues to crumble and factories scaled back, analysts expect that commodities prices producers of steel, chemicals, plastics and other basic goods will not recover until the larger economy stabilizes. Friday's lift in prices could be little more than bargain-hunting, they said.

    "We're going to have to see the light at the end of the tunnel before we see convincing sustainable moves," said Bart Melek, a commodities analyst at BMO Capital Markets.

    Battered technology stocks, which are down more than 50 percent since the beginning of the year, got a bump on Friday after the computer maker Dell reported that its earnings per share had risen 9 percent in the third quarter of its 2009 fiscal year, topping analysts' estimates. Dell rose in early trading, but was down at midday.

    As buyers dipped their toe into equity markets, the price of safe-haven government debt ebbed. The yield on the benchmark 10-year Treasury note rose to 3.25 percent on Friday after falling to record lows as investors scrambled to warehouse their money somewhere safe. The London interbank offered rate, or Libor, which measures how much banks charge one another to borrow money, rose slightly. The TED spread, which measures the difference between what the federal government and banks pay for three-month loans, declined.

    Despite Friday's modest gains in stock markets, many analysts still expect Wall Street's dominant trajectory to continue.

    "There doesn't seem to be a market direction but down," Mr. Ross said. "It's not that one sector is leading, one sector is lagging. Everything is just down."

    Asian stock markets rebounded from early declines Friday after Finance Minister Shoichi Nakagawa of Japan described recent turbulence in currency and equity markets as undesirable and said that governments should be prepared to take action. Although Mr. Nakagawa did not propose a specific response by governments, the Nikkei 225 stock index in Tokyo closed 2.7 percent higher, reversing earlier losses of as much as 3.9 percent during the morning.

    In Europe, markets registered cautious, early gains on Friday, but shares began to slip slightly in afternoon trading. The FTSE 100 in London was flat, and the CAC 40 in Paris and the DAX in Frankfurt were both down about one percent.

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    Keith Bradsher and Bettina Wassener contributed reporting.

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