NEW YORK — Good news from a bank — finally — sent the stock market to its best gain this year.
The Dow Jones industrial average soared almost 400 points after Citigroup chief executive Vikram Pandit said in a memo to employees that the troubled banking company was profitable through the first two months of 2009 and is having its best quarter since the third quarter of 2007.
That raised hope that the financial sector could be nearing a bottom, and it unleashed a broad rally among financial stocks.
Citigroup shares jumped more than 36 percent — though with the shares starting the day at just $1.05, that amounted to only a 38-cent gain.
Bank of America shares ballooned 26 percent, and JPMorgan Chase surged 22 percent.
The Dow ended up 379.44 points, or 5.8 percent, at 6,926.49. The Standard & Poor’s 500 Index jumped 43.07 points, or 6.4 percent, to 719.60. The Nasdaq composite index led the way, leaping 89.64 points, or 7.1 percent, to 1,358.28.
However, many analysts are still cautious — noting that Wall Street has seen many blips higher since the credit crisis and recession began.
Many investors fear stocks could be in for another sharp decline in the spring when companies report what are expected to be atrocious first-quarter earnings.
“It’s a trader’s rally,” said Steven Goldman, market strategist at Weedon & Co. “It’s not an investment rally just yet.”
Still, traders welcomed the sight of green numbers dancing across their computer screens rather than the recent waves of red. Word of Citi’s performance broke a months-long torrent of bad news from the banking industry.
“To have a sustained rally, we have to have a shift in sentiment,” said Kurt Karl, chief U.S. economist at Swiss Re. “One day isn’t going to make a trend.”
Investors also were buoyed by comments from Federal Reserve Chairman Ben Bernanke indicating that the Fed was looking into accounting rules for illiquid assets, raising hope that banks stuck with toxic assets might get some form of accounting relief.
The U.S. rally fed Japanese financials today, taking the Nikkei 225 up 4.3 percent by midday while the broader Topix jumped 3.2 percent.
Wall Street has already seen a few false starts. From late November until the start of this year, the Dow and the S&P 500 jumped about 20 percent before plumbing fresh lows this month.
“I would be surprised to see us trade back over 800 in the near term,” said Ben Halliburton of Tradition Capital Management in Summit, N.J., referring to the S&P 500. “The news coming out on the economic front will continue to be rather gloomy.”
