Dow’s biggest 2-day run since ’87

Dow’s biggest 2-day run since ’87

Citigroup rescue and Obama economic team picks propel stocks. Dow sees its biggest two-session point gain ever and biggest two-session percentage gain in 21 years.

By Alexandra Twin, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) — Stocks surged Monday in a broad rally as Citigroup’s massive rescue package and President-elect Obama’s picks for his economic team pushed investors off the sidelines.

The Dow Jones industrial average (INDU) gained 397 points, or 4.9%, after having been up 552 points earlier in the afternoon. The Standard & Poor’s 500 (SPX) index rose 6.4% and the Nasdaq composite (COMP) gained 6.3%.

The market also rallied Friday. The two-session gain of 891.10 points was the biggest two-session gain ever, according to Dow Jones. The percentage gain of 11.8% was the biggest two-session percentage gain since Oct. 1987.

The S&P 500 also saw its biggest two-session percentage gain since Oct. 1987, rising 13.2%. Its point gain was not significant statistically.

“There is a massive amount of liquidity on the sidelines but it’s sitting behind a dam of fear,” said Stephen Leeb, president at Leeb Capital Management.

He said that there needs to be a major catalyst to really start it flowing, but Monday’s news had certainly caused some cracks in the dam. In particular, the nomination of Timothy Geithner for secretary of the Treasury was helping Wall Street.

Stocks managed a last-hour rally Friday after reports surfaced that the New York Fed Bank president was Obama’s pick. Geithner is currently the No. 2 man at the Federal Reserve after Chairman Ben Bernanke and was the Fed’s point person on the Bear Stearns rescue – and Citigroup this weekend.

“Geithner assures a smooth transition between the Bush Administration and that of Obama, because he’s already co-managing what’s happening now,” Leeb said.

Additionally, the combination of Citigroup’s rescue and Obama’s news shows that both the current and incoming administrations are being active in dealing with the economy. This was a relief after worries last week that there was a lack of leadership in general.

However, the two-day advance was also in part a bounce after a brutal October and two weeks of declines. Even when accounting for Friday’s rally, last week was wretched, with the Dow off 5.3%, the Nasdaq off 8.5% and the S&P off 8%. more

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